MORTGAGE LENDERS ARE BEING WARNED about a practice that can make them think borrowers have better credit than they really do. For a fee to a credit rental company, consumers can boost their credit score by essentially renting another person's good credit history. It's called credit piggybacking. And, in nearly all states, it's legal.

Consumers are using a provision in credit card law that permits card holders to add authorized users to their accounts. After a few weeks, the payment history of the primary card holder flows through to the authorized user's credit report. Typically, authorized users are spouses and children, but they don't have to be.

One company says it will raise a customer's credit score by as much as 200 points. That could move a consumer from being considered subprime to being offered terms reserved for those with stellar credit.

Critics say that a consumer who artificially increases his or her credit score and then uses that information to obtain a mortgage is committing mortgage fraud.

“This clearly is fraudulent,” says Craig Watts, public affairs manager for Fair Isaac Corp., the company that created the FICO score that most lenders use to assess creditworthiness. “The only reason to engage in this kind of service is to deceive lenders.”

The Federal Trade Commission (FTC) is investigating piggybacking, says FTC spokesperson Claudia Bourne Farrell. In Nevada, where the practice is illegal, the state's mortgage lending division recently alerted mortgage professionals that they could face sanctions if they encourage or participate in the practice; consumers could face criminal charges.

Lenders should pay close attention to borrowers with credit reports that list them as authorized users on credit cards and ask for proof of their relationship to the primary card holder, says Terry Clemans, executive director of the National Credit Reporting Association.

“It's gaming the system,” Clemans says. “The down side is someone who gets into a mortgage they can't afford to keep.”