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Will Being an Authorized User Give You Credit?

Edited August 2008 to reflect an important new change: FICO will be including authorized users in their scoring again. They say they’ve found a way to distinguish between the legitimate and illegitimate users. More information can be found here. I’m leaving this on the site, however, to reflect the history of the FICO score.

I just had someone ask me whether being an authorized user on a card will give you a credit history, so I thought it might be worth a quick post. This is a good question because the answer used to be yes.

Lots of parents would simply add their kids as authorized users on their credit cards and the kid would get a defacto credit history and score. If you read Suze Orman’s books from even a couple years back, she advises this (if you have a good credit score).

But the rules have changed. It’s probably because the Fair Isaac group thought it wasn’t really fair that people could magically improve their credit by piggybacking off someone else’s. It defeats the purpose of a credit score.

After all, maybe the kid didn’t get to use the card. Or maybe the person actually bought the authorization. Lots of credit repair places were using this as a scheme to help people fix their credit.

Simply get added, get the new card, shred it (can’t imagine the person selling their score would want it lowered), get good credit, apply for card of one’s own, drop off account. Hopefully learn a few valuable lessons and only use credit score for mortgage.

But I wouldn’t be surprised if a lot of people, once they fixed their score, completely screwed over the lenders (and themselves).

As it is, being a joint account user should still get you those same credit privileges. That’s what Micah and I are trying to do, since the credit bureaus don’t even think I exist… Might it be gaming the system? I don’t know, they must have left that possibility on purpose, so I’m guessing not.

My thoughts? They were trying to discourage people from selling/loaning their credit by making it harder (need full credit check to get on the account) and by making it a more serious commitment (joint vs. authorized). I don’t even know how many joint users there can be.

Important corollary to this: Well don’t trust credit repair people anyway unless they talk about paying off your debt and responsibility and such. But don’t trust any scheme which plans to add you to another person’s card. Maybe you could become a joint account holder, but people are much less likely to sell that than “authorized user” and it also requires a full credit check.


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Authorized User Gets FICO Credit Score
August 15, 2008 at 11:03 am

{ 7 comments… read them below or add one }

guinness416 March 27, 2008 at 12:23 am

Didn’t realize that changed. Whatever about kids, at the point I first moved to the US, that was one of the few ways for new immigrants to establish a credit history. Too bad.

Ken Clark, CFP March 27, 2008 at 12:43 am

Agreed!

I just come back to the fact that “building credit” is a bunch of industry perpetuated baloney.

If I’m a lender, especially in this economy, I am going to give loans based on one primary thing… INCOME!

You can have great credit, but without stable income history… NO LOAN.

You can have lousy credit, but with solid income… A LENDER WILL MAKE IT WORK (at a higher rate).

Having good credit through college, will not buy you a home… trying to build credit, and making stupid choices will almost guarantee no loan, however!

Ken Clark, CFP

lulugal11 March 27, 2008 at 9:49 am

I guess I still don’t understand this credit score thing. I have a good credit score of my own and have credit cards and a car loan.

Recently my boyfriend added me as a user to one of his credit cards and I got my own card…now the credit line and everything is showing up on my credit report.

Fabulously Broke March 27, 2008 at 10:00 am

Side note about being with someone with credit cards.

It’s much better to have (each) your own credit cards, then to be authorized users on each others’ cards (if you wish).. because when or if (heaven forbid) you break up… one won’t get screwed on a credit score and/or have to extricate themselves from credit card joint holdings

Mom@wide open wallet March 27, 2008 at 12:26 pm

I didn’t know that changed either. That is very weird. I think I’m going to do some more research on this. I understand the reasoning, it makes sense. Your score shouldn’t be affected if you are not responsible for the payment.

I do know that you can only have two joint users, unless that changed too.

Dad March 27, 2008 at 5:56 pm

The last I knew, there can only be two responsible parties on a card. These are people who can be held responsible for the debt. If the debt goes bad, the bank can go after both of them individually. My wife is a joint member of my card. If I die first, she will have a credit history (from the card and from the mortage). The credit line they will allow will probably be adjusted based on her income level at that time.

At one time a few years ago, and it may still be true, if husband and wife are on the same card, the credit info was reported into both of their files. I think this was to avoid some people from putting all the assets on one spouse and debts on the other and slipping out from under through bankruptcy without losing much of their property. I believe the federal laws on credit have a part on how this is handled. But I would have to check.

mrsmicah August 14, 2008 at 9:11 pm

Edited because the FICO scores have been changed back. More information here: FICO changes the rules (post from August 15th, 2008).

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