Updated: May 3, 2013 12:14PM
This has to be the first great scam of the new millennium. It's called Seasoned Trade Lines. The premise is simple. You have great credit. Others have lousy credit. If they could just "borrow" your good credit for 60 days -- by becoming an authorized user on your credit card -- then they could apply for a mortgage and pay a lower rate, based on your good credit.
This column should end right here. The risks are obvious. You would rightly hesitate to add your own son or daughter as a co-signer on your credit card. After all, if their credit is good, they can easily get their own low-interest-rate card. And if their credit is bad, then they probably shouldn't be borrowing at all.
Why on earth would you add a complete stranger as a co-signer on your credit?
The companies that promote this call it an "honest credit boost." For a fee they'll match you up on paper with someone else's credit. Of course, the deadbeat never personally meets the sterling credit risk.
It's not really like a dating service. Rather, it's sort of a "credit sperm bank" -- a brief, impersonal encounter with long-lasting results!
Appeal to deadbeats is obvious
The appeal to the person with terrible credit is obvious. The Web sites of the companies that promote this dubious product proclaim they can, in less than 90 days, raise the credit scores of those with bad credit by more than 200 points! That will allow them easily "to buy a new home or take the vacation of your dreams."I can see how desperate people with bad credit would be willing to try this gambit, even though it comes at a steep cost. Oh, yes, to get attached to someone with good seasoned credit, it will cost Mr. Desperate anywhere from $700 to $2,000 -- up front -- depending on the size of the credit line Mr. Desperate accesses. But what could possibly be the appeal to someone with good credit, and thus presumably with a working set of brains?
The online advertisements promise people with good credit that they can "Earn up to $10,000 a month or MORE." For each additional authorized user on your card, you'll be paid about $100 to $150 per user. They won't tell you exactly how much until they "see your credit."
In case the math escapes you, if you decide to sign up for this insane idea of "sharing your good credit," you're not getting paid nearly as much as the company collects from the deadbeat who wants to borrow your credit. The difference is the huge profit these matchmakers get.
Matching desperate borrowers and greedy cardholders could be a big business. One site brags it has more than $1 million in "aged credit accounts" just waiting to add you as a user. Click on the link for "credit investors" (those with credit to spare), and they remind you many cards will let you have 10 additional signers, and some card issuers allow 99 people to be authorized users. But what happens if the deadbeat actually charges on your credit card, and then doesn't make the payments?
The first salesperson I spoke with told me that they never give the deadbeat your full credit-card number. Sure, but what happens when it shows up on their credit report, now that they're an "authorized user?" What's to keep them from calling the card issuer and asking for a replacement card?
'You bear all the risk'The president of one of the most ubiquitous companies, Steven deJesus, concedes that "you bear all the risk of any unauthorized charges." Since his Montana-registered, Florida-based company started offering this "investment opportunity" in October 2005, he has signed up 38 "investors" (credit-sharers), and more than 300 people who have been added as additional authorized users! He says he's had no complaints -- so far.
Of course, deJesus declares, if something goes wrong you could always sue him! He continually uses the term "credit investors" for those who offer use of their credit, but says he doesn't have to be registered in any way to conduct his business. And he, and others with the same concept, pay to have their adds pop up frequently on Google and Yahoo.The bottom line at one of these Web sites says in huge bold type, "We Want You to Achieve the American Dream." What they're really creating is the American Nightmare for those who use their good credit to "help" a desperate stranger. And that's The Savage Truth.
Terry Savage is a registered investment adviser. Check out Terry's answers to reader questions at suntimes.com, and click on Business. Distributed by Creators Syndicate.