Is Piggybacking Legal? A Short History of Credit Piggybacking and Lending in America
While this business model WAS considered to reside in a legal “gray” area, the fact is simply that a lot of banks and mortgage lending institutions are upset with it because our service gives power back to the people needing a second chance to give themselves a better financial future. Furthermore, the Federal Trade Commission – tasked with regulating the credit industry – and the Colorado Attorney General – responsible for the safety of consumers – both looked deeply into our company and business model. We worked closely with them sharing as much information as possible.
To help you understand a little more about credit piggybacking, it is important that you understand the history of lending in this country.
Banks and lending institutions have become incredibly lazy during the past 20 years and have been motivated to underwrite loans as quickly as possible in order to reduce their labor costs and to speed up the overall loan process. To help them accomplish this goal of expedient underwriting, the banking industry has employed the use of a “credit scoring utility” – called the FICO Score ® – which is a simple computer software program designed to “read” an applicant’s credit report and produce a 3 digit number between 300 and 850 to define the likeliness they will repay the loan according to the agreed terms. This new “technology” drastically reduced underwriting approval time, but at a great cost to the lending system overall. In adopting this credit scoring system, banks have abandoned traditional methods of underwriting, like verifying employment, income, assets, and the simple ability for an applicant to repay a loan – a practice that led to so called “liar loans” in the mortgage industry, which have been almost exclusively blamed for the housing crisis our country has been burdened with, as of late. As you can imagine, the scoring system is having negative impacts in other areas of lending, as well, such as credit cards and business loans. The effects on those two sectors are only recently being realized and will continue to reduce our economy’s ability to rebound. To understand how one little piece of software could have such a harrowing impact on an entire country, you need to understand how it works, and how it fails.
Firstly, the scoring model was, and is, incredibly flawed. Primarily because it is based on credit reports which are also incredibly flawed – it is well documented that over 70% of all Americans have incorrect information reporting on their credit files. It is also a known fact that over half of those reports contain incorrect information bad enough that it would cause a lender to decline an application for approval, or worse, approve it at a higher interest rate, giving the bank the plausible excuse to charge the applicant an unfair interest rate that does not correctly reflect the risk associated with granting an approval on a particular loan; thereby unfairly increasing the profits for the bank at the expense of the borrower.
Secondly, the credit reporting industry is notoriously difficult to work with in trying to correct misinformation; especially when doing so benefits the consumer. They use every technique available to them to make certain the credit reports they sell to the banks – private information about American citizens taken without the permission of those people – is incredibly difficult to correct, thus punishing unscrupulous borrowers for negative actions they were not responsible for – like a late payment on a credit card that belongs to someone else with a similar name, or identity theft.
Thirdly, those that sell the credit scoring model have been able to infiltrate industries outside of banking. In order to acquire car insurance, home owner’s insurance, or life insurance, you must have a good credit score, or you will be forced to pay higher premiums. In order to rent a place to live, the landlord will most likely base his decision on your credit score. Even to get a job, most employers will not hire you if you have a low credit score. This permeation of the credit scoring system into the fabric of American society has forced all of us to live within a box bound by rules. Rules, just like most, are fallible, and by design fail to consider the statistical extremes. In most situations, that is okay, because statistical extremes can be dealt with individually. Unfortunately, however, the statistical extremes present within the credit reporting and credit scoring industries are more common than they are extreme, causing financial damage and ruin among those affected.
This is where the demand for our service was born. We simply utilize the same mistakes the credit reporting agencies make, but instead of incorrectly reporting negative information, we take specific steps that we believe will cause the banks to report positive information to our clients’ credit reports. This can help consumers get loans they need at rates they better afford. The banks, of course, hate losing profit – justifiable or not – because borrowers figured out how to play their game in a way that benefits them. Banks tend to respond by disseminating lies and threats, which include legal terms, like “bank fraud” to scare people away from this practice. It is all political posturing, and it is easy for the uninformed person to assume the “banksters” are telling the truth, especially when that is what they are hoping to find.
The reality is, BoostMyScore has helped to boost the credit scores of normal everyday citizens, as well as bank VP’s and mortgage bankers throughout the country, because they know the truth – that the system is flawed and there is absolutely nothing wrong, much less illegal about improving ones creditworthiness, as long as doing so does not break the law.
To summarize, credit piggybacking is not illegal and effective. It is not immoral or unethical. It is a wonderful service that helps people to save money when they borrow money from banks. We are making a difference in peoples’ lives every day by lowering interest rates and payments, and I am extremely proud of what we do.