How to fix credit report damage from authorized user status
By Erica Sandberg | Published: October 8, 2014
Dear Opening Credits,
My ex-wife put my daughter on one of her credit cards when my daughter was a minor. She did this so my daughter could pay for a hotel along with her friends for senior week at the beach. Each friend gave my ex-wife the cash, which she neglected to pay toward the charge. This was in 2008 when my daughter was 17. Since then, the credit card has been maxed out by my ex. Fast forward seven years later and my ex-wife has filed bankruptcy and this now appears on my daughter's credit report at age 24. Is my daughter responsible for the balance on the card? How can she get this removed from her credit report? My daughter thinks is a form of identity theft. -- Steve
Perhaps your ex's intentions were noble in the beginning. Many parents add their kids to their personal accounts as authorized users. Most do it so their children can build positive credit histories as well as enjoy the convenience of using plastic when they're not eligible to get it on their own.
Your ex, though, mismanaged the account, and the person most harmed was herself. Although she gave your daughter formal permission to charge, account ownership did not change. Authorized users are not co-signers or joint account holders, and are in no way responsible for debt accrued with the card. The creditor can only pursue the account owner for payment, meaning your daughter is safe. She is neither legally nor morally bound to the unpaid balance.
Then again, I'm not sure there is a balance to worry about. Your ex should have included it in the bankruptcy, so the debt should have been wiped clean. The only other person who might be socked with it would be an adult who guaranteed the account with their signature. Your daughter doesn't fit that description.
Now it is true that authorized users will see active accounts on their consumer credit reports. But assuning it was discharged, it's no longer in existence and should be off her report. It may continue to appear on your ex-wife's, however, for up to 10 years, with an indication that it was discharged.
If the account is still listed on your daughter's report, that will damage her credit. She would need to fix that by having herself removed as an authorized user. To do so, have her contact the creditor. She needs to point out that she was merely an authorized user, and request that they stop adding the account's history to her file.
If she doesn't get anywhere with the creditor, her next step is to dispute the credit report line item with one of the top three credit bureaus. Make sure she follows the instructions on the credit reporting agency (Equifax, Experian or TransUnion) website to dispute the debt by mail. There is an option to do it online, but if she goes that route and clicks on "I accept these terms" for a dispute, she'll be accepting arbitration. She'll then lose the right to file a lawsuit if it comes to that. I doubt it will, but you don't want to waive that right.
As for identity theft, the definition set by the 1998 identity theft act made it a federal crime to "knowingly transfer or use, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, any unlawful activity." I'm no lawyer, but for this to be identity theft under federal law it has to be done knowingly with the intent to commit a crime. What your ex did was bad, but doesn't sound to me as if it fits the definition.
Taking the money and not applying it to the hotel charges as promised could be considered theft, though. And since the mom is capable of doing such a deed, I would warn your daughter to be extremely protective of her financial life. I strongly recommend she monitor all her banking accounts and credit reports regularly, checking all for anything amiss.
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- How will closing store cards affect my credit score? – With a slew of cards to close, it pays to be strategic ...
- How to build up a thin credit profile for a future mortgage – Lenders like to see you've handled a variety of credit products over a period of time ...
- How to minimize credit utilization while maximizing rewards – Multiple payments over a billing period can combat high utilization ...