Is Sharing Credit Caring? Piggybacking Accounts and Credit Outcomes
Is Sharing Credit Caring? Piggybacking Accounts and Credit Outcomes
Authors: Zachary Blizard, Alyssa Brown, Ryan Sandler
Abstract: U.S. financial regulations require creditors to consider accounts of consumers who are authorized users on a spouse’s credit accounts as if they were the primary user. Because credit record data does not allow easy identification of spouses, a practice of “piggybacking” has developed whereby individuals with no responsibility for paying an account are made authorized users for the purpose of boosting their apparent creditworthiness. This paper provides the first empirical analysis of the prevalence and impact of sharing credit in this manner. We identify and describe two types of piggybacking: first, the common practice of “family sharing,” in which parents add their young adult children to their credit cards; and second, a niche market for “renting” credit card tradelines to strangers. We use both event study and regression discontinuity methods to identify the effect of both types of piggybacking on access to credit, and on outcomes for new credit obtained. We find that piggybacking substantially increases access to credit, and find suggestive evidence that family sharing generally improves the terms of any credit obtained. We find broad evidence that consumers who obtain credit in their own names while piggybacking are more likely to default on the credit in their name, ceteris paribus. Finally, we discuss the implications of piggybacking for credit inequality in the United States.
Reading Notes
Venue
2025 Working Paper
Objective
To measure the prevalence and impact of sharing credit through authorized user accounts, separately examining family sharing and renting credit tradelines of strangers
Importance
This is the first study of the practice of sharing credit, despite its prevalence in the form of family sharing and industry discussion of tradeline renting
Background
Federal regulations require creditors/credit scoring companies to treat a spouse’s credit account equivalently to a that of a primary user, but it is difficult to determine who is a spouse, so in practice all authorized users are treated the same way.
Authorized users are not responsible for paying for account.
Credit reporting agencies (or a least the one contributing data here) exclude tradelines with record of delinquency from authorized user accounts, since they aren’t the responsible party
Data & Key Variables
CFPB Consumer Credit Information Panel (CCIP) 2007-2024 - nationally representative 1 in 50 sample of credit records and the records of associated borrowers with all tradelines. Balances, credit limits, delinquency status, relationship to tradeline (individually responsible/jointly responsible/authorized user/cosigner), hard inquiries, credit score, Census tract
Family sharing = age 25 or less, resides in same Census tract as primary borrower, at least 16 years younger than primary borrower
Tradeline renting = authorized user on tradeline for 6 months or less and has no other credit or geographic ties to primary borrower
New account success= hard inquiry + new opened account within 14 days (120 days for mortgages)
Methodology
RD in time using parent tradeline delinquency timing as exogenous shock to family sharer’s credit report/score (family sharing sample only)
Event study using the timing of appearance of the authorized user tradeline (both family sharing and tradeline renting samples)
Results
Authorized user status significantly increases access to credit.
Both family sharers and tradeline renters are more likely to successfully open an account when they have access to a tradeline as an authorized user
Authorized users are also more likely to become delinquent in repaying the credit they received.
Tradeline rental does not lead to long run increases in credit score
For family borrowers who receive credit despite a delinquency in the primary borrower account for which they are an authorized user (control group in RD), there is no overall change in probability of delinquency, but are more likely to be delinquent in auto loans (w/ higher interest rates), and less likely in credit cares (w/ lower credit limits)
Key Table/Figure
