Backdating Credit Cards and Your Credit Score
Backdating is an interesting term. When applying for a credit card, the credit card company can imply that you have had a credit card much longer than you have. Since the length of time that you have had a credit card really impacts your credit score in a good way, this practice can help your credit rating. Sounds a little fraudulent, but apparently not. It is very different from debt settlement.
This means that if you’ve been a member of American Express (e.g had one of their credit cards) since 1990 and applied for a card this year, they would report the opening date of the new credit card as 1990. Giving it an extra 25 years of age. Age is important when it comes to credit scores, as one of the scoring criteria is average age of all accounts (which is a sub section of length of credit history – which accounts for 15% of your FICO score). See Doctor of Credit.
Adding a Credit Card User to Build Credit Score
Another practice that really helps improve a person’s credit score is to be added as an authorized user on someone else’s credit card. It’s an old practice, and very effective.
The practice of adding an authorized user to your credit card … was originally most prevalent with parents trying to help their children with their credit history. This is also very common among spouses, for both convenience and for one spouse to help the other with their credit worthiness. Even partners, other family members and close friends frequently made use of this valuable arrangement. See creditcardideas.com
This is not the be confused with debt settlement, which is a way to negotiate a reduction in the amount of debt you owe.
Fraud and Backdating Practices
Backdating, as a general practice in financial matters, is often considered fraud. After all, a company or person is representing the time that a transaction happened, or a contract was signed. The date of a contract is considered a key term of an agreement. Changing a key term materially alters the agreement. Representing that a key term is different than what it really is, can be fraud, such as the following example:
Mr. Horowitz, a co-founder of the venture capital firm Andreessen Horowitz, said in a blog post on Thursday that he narrowly avoided getting caught up in the options backdating investigations that swept corporate America in 2006. What saved him, he said, was a skeptical general counsel who recommended against adopting a compensation practice used at other companies. See NY Times Dealbook.
Dating any document by a date earlier than the one on which the document was originally drawn up. Under most circumstances, backdating is seen as fraudulent and illegal, although there are some situations in which backdating can be used in a legal and beneficial way, such as backdating a claim for a past period.