When authorized user status works against you

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Question for the CreditCards.com expert Dear To Her Credit,
I am new to monitoring my credit. I just pulled all three of my reports to see how I'm doing. To my dismay, even after years of meticulous efforts, I am not doing well.

I'm 27, and I had a few hiccups as a 22-year-old, but nothing I haven't been correcting proactively for years. Recently, my mom tried to help me establish better credit by adding me as a secondary user on her American Express account.

After a year, I checked my score and discovered that my points have dropped drastically. I now see that her American Express is on revolving credit and her balance is $4,000 to $5,000 every month. Because I am attached to the account, it reflects as my revolving credit as well. My checking account balance every month is between $500 and $2,500. I'm assuming that it looks like I am spending more than I am making, because it shows that my credit limit is $4,000.

Should I cancel this card and eat the loss in points?  -- Julie

Answer for the CreditCards.com expert Dear Julie,
I'd have myself removed from Mom's card.

The problem is not that your mom's spending dwarfs your checking account balance. Your credit history does not show how much you make or the balances in your bank accounts. The problem is that hitching a credit score ride on someone else's card doesn't always go as planned. You have no control over how much she spends or when she pays it. If your mom has an emergency, such as a serious illness or unemployment, the status of her account could head south, fast.

You are correct in assuming that it is most likely that your mom's monthly spending is what is bringing down your credit score. While you don't say what her credit limit is on the card, the higher the balance, the higher debt-to-credit-limit ratio rises, which negatively impact your FICO score. Personal finance experts recommend using less than 20 percent of your credit limit to maximize your FICO credit score.

Your next step is to build up your credit yourself. If you had some problems at age 22 (and who hasn't?), but you've been working on it meticulously since then, you should be able to stand on your own credit-wise now. You can open your own accounts if you haven't done so already. If you have a steady job, it shouldn't be that hard. Don't get carried away -- a couple of credit cards should do. You can also request that your other creditors, such as your landlord, utility companies and cellphone company, report to the agencies (but there's no guarantee they will comply). If you're buying a car anyway, you might get a short-term auto loan and then pay it off as quickly as possible.

Never buy anything or pay unnecessary interest expense just to build up your credit. You can build a stellar credit history by using credit and paying it off promptly.

Don't take it personally that your score isn't where you want it to be right now. Unless you are trying to buy a house or apply for credit, chances are it won't affect you before you have a chance to improve it. You may not qualify for the lowest rate cards yet, but that's all the more motivation to pay them off every month.

See related: 5 credit score secrets of the young and FICO-savvy10 money commandments for young professionals

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Updated: 03-26-2019