How low can an authorized user go?

By Erica Sandberg

Opening Credits

Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com. Ask a question. 'Opening Credits' stories

Dear Opening Credits,
Can an "authorized user" of an account open other accounts in the primary card holder's name without the cardholder's knowledge?  -- Jay 

First, your question: No, as an authorized user, you can't open a different account in the primary cardholder's name -- and you certainly cannot do so without the cardholder's permission! That would be considered identity theft, which is a federal crime. Outside of the legal mess you'd be in, you'd also be stirring up some major relationship trouble with the person who gave you access to his or her credit line. A rather nasty way to repay their kindness, don't you think?

So let's cover what an authorized user is. Essentially, it's a designation that gives you the right to tap into the primary account holder's credit line. You've got a credit card with your name on it, and may charge with it anywhere the account is accepted. However, because the issuer did not use your personal or financial information to qualify you for the account, it will not hold you legally responsible for the charges that you make. The primary account holder, however, may expect repayment for your charges.

Also to note is how your status as a guest user will show up on your consumer credit report. The account will appear on the files of all three major credit reporting bureaus -- TransUnion, Equifax and Experian -- in the trade line section, with an "A" next to it. That letter indicates that you are an authorized user and not a joint or individual account holder. You will also see the account's complete information, including the date it was opened, a detailed payment history, the credit line and the current balance. This is very important data to know, because even if you were to be absolved all liability, both from the creditor and the person who let you piggyback on the account, it will affect your credit history and FICO score (except for Experian, which only reports positive account information for authorized users).

If the person who is supposed to pay on time and keep the debt nice and low fails to do so, you (and all other cardholders) will have to deal with the damage. Conversely, if the designated account manager does a fabulous job and you do nothing more than shop and enjoy the spoils, you'll see a positive effect on your credit rating.

Unlike with a co-signer, the primary account holder can revoke your privileged status at any time. Conversely, if you don't want to be associated with a bad account anymore, you can contact the credit card company and request removal, too. The past will remain, but you can take control of the future. 

Whether you're the account's main owner or an honored guest, it is essential that all parties are cognizant of how the behavior of each of you has an impact on the other. So take pains to make each other aware of when you charge, the amount you spent, and which of you will get the bills and make payments. Write a contract that covers what the authorized user's obligation to debt payment should be. For example, it may stipulate that all charges made by secondary cardholders must be paid in full to the primary cardholder by the first of the month. Such agreements can help you all avoid confusion and arguments.

And no funny business, like trying to run off with the other person's credit information to borrow on the sly. That's just wrong on so many levels.

See related: No longer want to be an authorized user? Just ask, Authorized user's bad credit won't hurt primary cardholder, What to expect when you're made an authorized user on a credit card

Erica Sandberg's articles and insight are featured in such publications as the Wall Street Journal, Pregnancy, Babytalk, Redbook, Bank Investment Consultant, Prosper.com, MSNMoney.com, and Smartmoney.com. An active television and radio commentator, Erica is the credit and money management expert for San Francisco’s KRON-TV, a frequent guest on Forbes Video Network, Fox Business News, Businessweek-TV, and all Bay Area networks. Prior to launching her own reporting and consulting business, she was affiliated with Consumer Credit Counseling Services of San Francisco where she counseled individuals, conducted educational workshops, and led the media relations department. Erica is a member of the Society of American Business Editors and Writers, and on the advisory committee for Project Money.

Send your question to Erica.

Published: November 2, 2011

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