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.
Dear Opening Credits,
When I was a minor, my father added me to one of his credit cards in order to “help build my credit.” I am now on my own and he has run up the balance to over $20,000 of $25,000 available. He is making payments on time, but this is obviously detrimental to my credit score, not to mention the large amount of debt in my name now. Do I have any recourse at this point? Am I responsible for the debt? I’d like to avoid legal action against family, but I can’t have my credit score damaged, and I’m not in a position to pay off the debt. — Darren
Boy, am I glad you wrote, because I get to make you grin! You see, there is an easy resolution to your credit problem: Ditch the card.
I presume that when your father added you to his account as an authorized user, he had the best of intentions. As a young teen, you were able to charge with a credit card that had your very own name on it. I bet that was sweet. And while you may have had to reimburse him for certain or all charges, you were not (and are not) in any way responsible to the issuer for the bills.
There are two reasons for being off the financial hook to the company — one, you were a minor when you were added and so could not enter into a legally binding contract; and two, you’re just a guest on the account. That’s what being an authorized user is all about: liability-free privileges.
Even if Dad didn’t allow you to charge all the comic books and slingshots you craved (or whatever middle-school boys want), and instead just added you so you could have a good credit rating when you became an adult and needed it, it was a generous move on his part. You see, having another person in any way attached to an account is risky for the owner, since total control is lost.
Nonetheless, when your father spent within his means and kept the balance low while also sending the payments on time, all was well. From the date you were added, the activity for that card has been showing up on both your credit reports, so your credit rating benefited.
Sadly, though, something went amiss. You don’t mention why your father allowed the debt to creep up to its limit, but it has and now the credit reports and scores of all cardholders are being affected. Outstanding debt to credit limit is the second most weighty factor in a FICO score. Owing too much for too long will lower those numbers.
So let’s return to the simple solution — excusing yourself from cardholdership. Either you or your father can contact the issuer and let them know that you’d like to be removed from authorized user status. The company should not give you a hard time because you are not a joint owner. It would be a different scenario if you were a co-signer (joint account holder). If that were the case, you’d probably have to pay the balance to zero before being able to say goodbye.
Once your charging privileges have been revoked, the credit card company will no longer send information about that account on any of your credit reports. The damage will be deleted — without having to send them a penny.
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