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How being an authorized user can hurt your credit score

By Todd Ossenfort

The Credit Guy
'The Credit Guy,' columnist Todd Ossenfort
The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues.

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Question for the CreditCards.com expert

Dear Credit Guy,
How does being an authorized user on an account affect your credit rating? I am listed as an authorized user on two of my mother's accounts that have about a 99 percent credit-available to credit-used ratio. Does this negatively affect my credit and how significantly?  -- B.C.

Answer for the CreditCards.com expert

Dear B.C.,
It has been a practice for quite some time for persons who wanted to establish credit or improve their credit to be added as an authorized user on a relative's credit card. The account is considered just the same for credit scoring as if it were owned by the authorized user. The authorized user benefits from the good credit history provided by the owner of the account. However, it can also have a downside. If the owner of the account did not pay the account as agreed and on time, the negative actions would also affect the authorized user.

Several years ago, some enterprising people decided that adding authorized users to an account was a way to make money. They charged a fee to persons with no familial or other connection between each other to be added as authorized users to the account of a person with good credit. The account could not be used by the authorized user; the only purpose of being added was to raise the authorized user's credit score. Known as piggybacking, the industry blossomed overnight. As a result, the credit scoring folks at FICO decided that piggybacking in this way was not acceptable and proposed leaving authorized users out of credit scoring models.

However, after many protests and the realization that 50 million legitimate authorized users would be affected, the good folks at FICO came up with a formula to keep genuine authorized user accounts as part of the scoring process. Simply put, the account is legitimate as an authorized user when a person receives a credit card for their use on someone else's account. Just to note, the VantageScore has never considered authorized users as part of its credit scoring formula.

So, the answer to your question is yes, those accounts of your mother's on which you are an authorized user will affect your credit. In the FICO scoring model, 30 percent of your score is based on the amount you owe. One component of the amount-owed calculation is the amount of credit used compared to the credit limit on revolving accounts (credit cards), which is called the credit utilization ratio. How much the two accounts of your mother's affect your score depends on how many other accounts you have, whether they are in good standing and how long you've had any other accounts.

If you don't use the accounts and don't believe you need them for your credit history, just ask that your mother to remove you as an authorized user. She can do so with a phone call to her card issuer. I would recommend that you check your credit reports several weeks after the request to assure that they have been removed. If they still appear on your reports you can dispute the listing as "not mine" and see if that will get them off. You can receive a free copy of your credit report from each of the three major credit bureaus once a year at annualcreditreport.com.

Take care of your credit!

See related: Piggybacking gets clemency from FICO, Piggybacking: When should the free credit ride end?, What VantageScores are, how they work

Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.

The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week. Send your question to The Credit Guy.

Published: July 20, 2009


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