When being an authorized user is useless

Opening Credits columnist Eric Sandberg
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.

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Question for the CreditCards.com expert Dear Opening Credits,
I am trying to build good credit. My brother made me an authorized user on his credit card, but the bank does not report authorized users. What can I do to get them to report it?  -- Melanie 

Answer for the CreditCards.com expert Dear Melanie,
As you can see, there are two essential elements to the credit building process. The first is that you have to regularly borrow and repay money. The second is that the lender must report all of that activity to the credit bureaus. If they don't, no one (but you) will know what a great job you've being doing.

It was a nice gesture of your brother to let you join him on his credit card. As an authorized user, you have a credit card that you can charge with anywhere it's accepted. The bank that issued the card didn't give it to you, though, he did. You're not under any contractual obligation to pay back whatever you spend to the creditor, so if something goes wrong and the debt goes delinquent, they can't sue you for the debt.

While most creditors do send information about the account to all the cardholders' credit reports, some only report the account owner's activity. That, too, can be great news for you, since your credit report would be unaffected if your brother were to mess up and fail to pay his bills.

Still, you want to establish a great credit reputation, and with this particular card you can't. You may request that they reconsider and send the credit bureaus the account details, but don't be surprised if they say no. If that's their policy, they'll probably stick to it.

Frustrated? Don't be! There are other ways to start and create a healthy credit record.

  • Get your own card. Even with no history of using a credit card or taking out a loan, you may be able to get one of your own. Check for current offers on CreditCards.com. Some of the accounts are secured, so you'll need a bit of cash to put down as collateral, while others are unsecured. The credit lines are usually low, which makes sense because you're just starting out and the bank can't be sure you're a good risk yet.
  • Become an authorized user on a different account. Maybe your brother has another credit card and that issuer does report all cardholders. If he was willing to extend the deal to you once, maybe he'll do it again. This is called piggybacking, by the way. It's a wonderful visual for the process. You have the luxury credit ride, while he has to do the huffing and puffing to make sure the account remains in good standing.
  • Find a co-signer. Perhaps you know of someone who has a positive credit rating who is willing to go in on a new card with you. In that case, that person would be a shared owner, and the two of you would be equally responsible for it. If you do get someone to guarantee an account, you must be extremely careful to treat it well. What you do will certainly affect the other owner's credit history. Ruin that and you can ruin a relationship, too.

If you must be an authorized user or get a co-signer, I strongly suggest that you used the shared account only long enough to build the credit history you desire. That should take about a year of consistent yet excellent use. Charge small items and then pay on time and in full. After that, return to option No. 1 and declare your credit independence.

See related: Removing an authorized user from a credit card, When authorized user status works against you

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Updated: 03-21-2019