Jun 1, 2007
Building Credit History as an Authorized User
What is an authorized user?
An authorized user is someone who is added to another person's credit card account and authorized by the principal cardholder to use that account. The authorized user receives a credit card with his name on it and is able to use the credit card as if it were his own.
Payment history for that credit card is now reported to both the principal card holder's credit report as well as the authorized user's credit report, regardless of whether the history is good or bad. That means the authorized user's credit can benefit from the relationship, but it can also suffer if debt accumulates and payments are late or not made at all.
How to Become an Authorized User
1. Confirm your friend's or family member's credit card issuer will allow an Authorized User (not a co-signer unless you need a card...however, there is risk to your friend or relative)
2. Confirm the card issuer reports your friend's/relative's account activity for an Authorized User to the big 3 credit reporting agencies.
3. Confirm the card holder has a VISA or Mastercard -- most powerful. Avoid Capital One and American Express...they have a *screwed-up* reporting method which actually penalizes a card holder's FICO.
4. Confirm the card holder's account does not carry a balance greater than 30%.
5. Confirm the account holder is not late (ever...no 30, 60 or even 90 day late payments).
6. Confirm the account holder has had the card for at least five (5) years - the longer the better. It's more seasoned.
7. Confirm the account holder regularly uses the card...obviously, there's a benefit to *using* one's credit.
When you're an Authorized User, you do not need to receive a card; therefore, in such cases, there's no risk...to the other person that is.
NOTE: We've made it clear that with no card, there is no risk to your friend or relative. You are now at risk, however! How? Your friend's-relative's account history goes to YOUR credit file. That's AWESOME, provide your friend or relative really HAS the account history he or she has told you. If not, you get your friend's or relative's account history...good or bad.
Absolutely know your friend's or relative's responsibility.
However, if your friend or family member is not straight with you about his/her payment history (lates), seasoning (age of account), cash-to-credit limit (how much is charged to the card versus credit limit ratio), credit limit (what amount), there may not be a benefit to you.
On the other hand, you also may receive a real card with your friend or relative co-signing for you on their account, if that's your intent. There’s more risk, but it’s doable.
An authorized user is someone who is added to another person's credit card account and authorized by the principal cardholder to use that account. The authorized user receives a credit card with his name on it and is able to use the credit card as if it were his own.
Payment history for that credit card is now reported to both the principal card holder's credit report as well as the authorized user's credit report, regardless of whether the history is good or bad. That means the authorized user's credit can benefit from the relationship, but it can also suffer if debt accumulates and payments are late or not made at all.
How to Become an Authorized User
1. Confirm your friend's or family member's credit card issuer will allow an Authorized User (not a co-signer unless you need a card...however, there is risk to your friend or relative)
2. Confirm the card issuer reports your friend's/relative's account activity for an Authorized User to the big 3 credit reporting agencies.
3. Confirm the card holder has a VISA or Mastercard -- most powerful. Avoid Capital One and American Express...they have a *screwed-up* reporting method which actually penalizes a card holder's FICO.
4. Confirm the card holder's account does not carry a balance greater than 30%.
5. Confirm the account holder is not late (ever...no 30, 60 or even 90 day late payments).
6. Confirm the account holder has had the card for at least five (5) years - the longer the better. It's more seasoned.
7. Confirm the account holder regularly uses the card...obviously, there's a benefit to *using* one's credit.
When you're an Authorized User, you do not need to receive a card; therefore, in such cases, there's no risk...to the other person that is.
NOTE: We've made it clear that with no card, there is no risk to your friend or relative. You are now at risk, however! How? Your friend's-relative's account history goes to YOUR credit file. That's AWESOME, provide your friend or relative really HAS the account history he or she has told you. If not, you get your friend's or relative's account history...good or bad.
Absolutely know your friend's or relative's responsibility.
However, if your friend or family member is not straight with you about his/her payment history (lates), seasoning (age of account), cash-to-credit limit (how much is charged to the card versus credit limit ratio), credit limit (what amount), there may not be a benefit to you.
On the other hand, you also may receive a real card with your friend or relative co-signing for you on their account, if that's your intent. There’s more risk, but it’s doable.
Labels: authorized users, build credit, credit history, increase FICO
posted by Chane Steiner at 12:47 AM | 
