Rebuilding your credit as an authorized user
Dear Opening Credits,
My question is regarding rebuilding my credit. My wife wants to add me to one of her credit cards to help me bring my credit up. My question is under what circumstances would I have to arrange so that the purchases I make have a positive effect on my credit and simply aren't additional purchases with no effect on me? Thank you.
It sounds like what your wife is offering is to make you an authorized user on her existing credit card account. If you're prepared to use credit wisely from this point forward, I suggest thanking her profusely and then taking her up on the ride. You'll benefit from the arrangement, known as "piggybacking," as long as the account is treated well. Most banks report the credit activity on authorized users' consumer credit files, but to be sure this bank does, call them and find out.
If the bank does report to all cardholder's reports, you don't have to do anything for the information to begin being listed. In fact, you don't even need to use the card at all. Neither the credit card company nor the credit reporting bureaus cares which of you charges or sends the payment. As long as someone is borrowing and then repaying responsibly, everybody is happy.
Before you do anything, though, make sure that you really are reformed and prepared to treat the card well. If you make a mistake, you won't just be hurting your credit, but also the woman who was trusting enough to give you a second chance.
Also understand the roles you and your wife will each play regarding this card. Because your wife is the account's sole owner, she is totally liable for what happens to it. Consequently, if a debt goes delinquent and the credit issuer decides to take legal action to claim the money, she's the only person it can sue. As an authorized user, you would be free from this sort of accountability.
Keep in mind that you may end the relationship with the credit card company at any time, even if there is money owed. That means that if problems do erupt, you can free yourself from the account and it will no longer show up on your credit report. But your wife can also pull the plug on those privileges whenever she feels like it.
In essence, your wife's role with this card is to manage it perfectly. Part of that is to make sure that she only adds people to the account who won't cause trouble. Your role is to only charge agreed-upon items and services, and to keep the balance well within the amount that the two of you can afford to repay.
In order for this account to mend your damaged credit rating, you and your wife would need to do the following:
- Use it consistently. If no one is charging, there will be nothing to report. Choose a small, regular, and affordable expense to put on the card.
- Make payments on time. A long history of perfect payments will help your credit rating enormously.
- Keep the balance at zero or very low. Paying in full every month is best, but if you do carry over a balance, make sure it's less than 30 percent of the credit limit. For instance, if the limit is $1,000, your revolving debt should be no more than $300.
Once you have a year of this kind of activity under your belt, check your credit score and see where you stand. It should be improved enough to launch your personal credit career. Get a credit card in your name only and extricate yourself from your wife's account. Then take her out to a nice dinner with your card -- as long as you can and will pay the meal off in 30 days, of course.
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Published: September 4, 2013
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