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How Does Being an Authorized User Affect My Credit Score?

A reader writes in looking for advice on whether or not becoming an authorized user on his parents' credit card will help his credit scores. John Ulzheimer, credit expert for Credit Sesame, answers.
10/08/2014 02:08pm ET | Updated December 8, 2014
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by John Ulzheimer, Credit Expert for CreditSesame.com

A reader writes in looking for advice on whether or not becoming an authorized user on his parents' credit card will help his credit scores. John Ulzheimer, credit expert for Credit Sesame, answers.

"John, I'm trying to build up my credit score and I read online that if I can get my name added to my parents' credit card that it will help my credit scores. Is that true?"

This is a simple question with a not so simple answer. The "authorized user" strategy is one of the most commonly used methods by people who want to build their credit from scratch and by people who are trying to rebuild their credit after some sort of credit disaster. The strategy is equally effective for both scenarios, and here's how it works.

How the Authorized User Strategy Works

You will have your name added to the existing credit card account belonging to another person. But rather than being a co-signer or a joint cardholder, you're added as an authorized user. A few days later a card with your name on it will be sent to the primary cardholder, who is usually your spouse or one of your parents. Once the card is activated you'll have the same buying power as the primary cardholder.

Payment Liability for Authorized Users

Authorized users are not held liable for the charges or balance on the account. That means you will never be asked to pony up any money to cover the payments. That responsibility will always remain with the primary cardholder and any co-obligors on the account.

Authorized Users on Credit Reports

Within a few months the history associated with the account will be added to your credit reports. While this is commonly done, it's not 100 percent universal. Check with the credit card issuer regarding their credit reporting practices for authorized user accounts to make sure they'll report the account on the authorized user's credit reports.

Authorized Users in Credit Scores

When the account is added to your credit reports it will immediately be considered by credit scoring systems. It will be measured on par with all of your other accounts, meaning it's not discounted simply because you're an authorized user. The only exception is if FICO's newer scoring models believe you're simply trying to game the system by having your name added to the account.

FICO's Anti-Piggybacking Logic

FICO hasn't provided any public detail on that aspect of their scoring logic but many believe they've figured out a way to sniff out scenarios where people have been added to credit card accounts where there's no legitimate relationship between the two consumers. This process is called "piggybacking" and is an attempt to game the credit scoring system. It's not much of a problem today but several years ago it was all the rage.

For Best Results

You're going to want to have your name added to a credit card account that is old, has a low balance relative to the credit limit, and has always been paid on time. These aspects of the account are very helpful to your credit scores. In fact, you could see your credit scores improve considerably, depending on your individual scenario.

The best part of being an authorized user is the fact that you have no liability for the account. That means if the primary cardholder does something irresponsible with the account, like miss payments or max out the card, you can easily have your name removed from the account. When your name is removed from the account it's fairly easy to have it removed from your credit reports.

Be aware, however, that the authorized user strategy will run its useful course and then it's time to establish accounts in your own name. There are some lenders that will want to see that you've been a liable party on credit cards before they'll extend credit. So, you can't just have your name added to other accounts and assume you're done building credit.

Give yourself a couple of years and then it's time to apply for a credit card as the primary cardholder. You may not get terms as aggressive right out of the gate but as long as you make your payments on time you'll be surprised how quickly credit card issuers will adjust your account attributes, like the credit limit. And you'll be able to thank the authorized user strategy for helping to get your credit journey started.

This post originally appeared on CreditSesame.com. John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is twice Fair Credit Reporting Act certified by the credit industry's trade association and has been an expert witness in over 140 credit related cases to date. Since 2004 John has been interviewed and published over 3,000 times on the topics of personal finance and consumer credit. Formerly of Equifax and FICO, John is the only recognized credit expert who actually comes from the credit industry.

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