Credit hacks dissected: Do these really work?

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My buddy Alan sent me an email with some interesting credit hacks:

“1) If you have a short credit history (like me), get your parents/grandparents to add you as a authorized user on their oldest credit card (you inherit their credit history length)
2) If you have any blemishes in the past (like a single missed payment when you first got your credit card in high school) dispute it right before making a car/house transaction because while that blemish is investigated, it is not counted against you for 30 days (while they investigate it); if the investigation does not get back to you within 30 days, the blemish is gone permanently”

I wanted to check for sure, so I asked another friend, Andy Jolls at videocreditscore.com, who is a former MyFico exec. His reply:

“These are things we called score gaming at myFICO.

FICO ’08 closed the loophole around authorized users to an extent. People were using his method number one to add users to anyone with a strong credit history to get the score boost. FICO ’08 now checks the likelihood it’s an honest auth. user [parent/grand parent, etc. ] and will let the scores intertwine. Yes, it can happen pretty quickly.

http://www.videocreditscore.com/fico-08/

Number 2 is not true, company has to remove it in 30 days if it can’t verify it, but it does count against you while they investigate. Said another way, you send in your dispute on August 1, the company doesn’t need to update your score immediately when they get the dispute. They have 30 days to investigate and respond.

Also, it’s not gone permanently. this is what credit repair shops tout but that’s not right. Scenario: Aug 1, you mail the dispute, Sept 1, they remove the item because they haven’t heard back. Sept 16th, they get verification of the account, so they add it back in. Make sense? Sometimes, it is removed permanently because they never hear back.”

http://www.videocreditscore.com/build-credit-score/

Learn more: Read more about the hidden perks of credit cards.

What credit hacks do you know about?

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14 Comments

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  1. The best credit card hack I know is to ‘hack’ them into little pieces.

    Focus all the energy from ‘gaming’ them into something in your life worth more much, much more to you. A.k.a. anything really.

    :-)

  2. #1 can work to your disadvantage- my (financially irresponsible) parents added me as an authorized user on their credit card when I turned 18. I was responsible for my own finances, but I was moving to college, and this was a nice “in-case-of-emergency” gesture on their part. However, I never had any emergencies, so I never ended up charging anything to their account. I didn’t realize I was still on their card until I ran a credit report when I was 24. Surprise! Despite the fact that I had never missed a payment or carried any debt whatsoever on my own credit cards, my parents’ terrible credit affected my credit score. After a few phone calls to the card and correction requests to the credit agencies I got things resolved, but there were several years there where I was completely unaware of the situation. Another lesson in the importance of checking your credit score!

  3. Thank you for researching this! My husband is from Germany and has *no* credit history in the US. I’m adding him to my checking account which I’ve had since 1993 which has a revolving credit line as overdraft protection. Since this would certainly be considered a legitimate authorized user, I’m pleased to learn he may be getting an instantaneous credit boost. Woot! (And no it won’t be the reverse situation as for poor JW as I just secured a 4.75% mortgage rate. Double woot!

  4. I agree with Baker. Don’t worry about your credit score because all it does is show you’re good at borrowing money. Not impressive! Worry more about saving up cash and paying off any debt you have.

    If you’re responsible with money, you can get a mortgage with no credit score. You’ll still may get screwed on insurance rates, but if that’s the only problem you have due to not borrowing money, then it’s no big deal.

  5. Hi Everyone! Quick question: Ramit, just came across your “I Will Teach You To Be Rich” book today. I’m thinking about ordering it but am curious: does it have advice/chapters on credit score repair? I am 23 and have collections/past due accts on my report from my undergrad years (all paid now) and graduate school student loans. I just started my first “real” job, so I’m looking for a roadmap for saving/getting my financial footing & credit repair. Thanks!

  6. Not really a credit hack but for anyone concentrating on improving their scores while still “getting back on their feet”, keep accounts current that are actually reported. That means don’t worry about being late on the electricity vs sending in your min payment on the credit card. Obviously you want to keep the lights on, but the idea that utilities help build your credit score keeps persisting, they don’t. They can be used as references but thats all.
    Ramit on thing I would like to know, went through the mortgage application process and I was told by several people that “medical accounts” presumably collections by hospitals and such are disregarded for credit scoring purposes by most lenders as health care billing is notoriously incorrect. Please check this to see, as obviously the sums in health care are quite large and incorrect billings can occur, most people cannot afford to pay them to protect their scores and must fight them till corrected.

  7. @ Jason

    “If you’re responsible with money, you can get a mortgage with no credit score.”

    While I am sure you think it would be nice if you could just waltz into a bank and tell them that you have no credit score but you are responsible with your money and have good table manners to boot so can they please give you a mortgage – Unfortunately, in the real world it just doesn’t work like that.

    Using credit cards responsibly is a great way to not only save some money via rewards and insulate yourself from theft but also build a credit score and in turn get great rates on a mortgage and insurance.

  8. Some banks will do manual underwriting if you don’t have enough credit history for a score. Not very many will do it and a substantial down payment will probably have to be made.

  9. Jequeatta, do what I did and check your local library first. (Sorry Ramit!)

  10. Interesting post. I have a good question that I hope someone out there can answer. Okay, I am 21 years old and am in my last year of college. I have two credit cards, one with $3000 limit, and one with $800 limit, and I have never made a late payment]. I understand that maintaining high credit limit improves your credit score over time. But I also know that calling the credit card companies and asking them to increase my limit adds an inquiry to my credit report. I am not going to be applying for any major loans for at least 2 to 3 years, so I am assuming that any harm these multiple inquiries will do will dissolve in a couple years time. So the big question is: Should I phone the card companies now to increase my credit limits, so as to improve my credit score, or is this a bad idea?

  11. Tim

    Look around on your online credit card screens. Both of my cards (both are from two different companies) have a button where you can click to increase your credit limit and the company tells you that they do NOT inquire to the credit bureau for these online checks. I raised one of my cards from a $1,000 limit to now a $5,000 limit just after having the card for a year with no late payments. Good luck, I am about to graduate college too :)

  12. @ Fallon

    What credit cards do you use?