The dark side of piggybacking
Mistakes by an account holder hurt an authorized user's credit, but not forever
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Dear Opening Credits,
I put my son's name on my credit as a user when he started college, if he needed to buy books. He went to apply for an auto loan and found that Chase has put my card on his credit report. When I was asked over the phone in 2006 if I wanted to put anyone on my account to use the card, I gave his number, but I was not aware that they would hold him responsible for my debt. They said he is paying for my financial hardship. How can I fix this? He called the company, and his name cannot be found, but it is on his record. He doesn't deserve this. -- Ola
I'm afraid that the finance company your son approached for the car loan is telling the truth: He is indeed paying for the way you mishandled the credit card.
In fact, you just described a major problem associated with "piggybacking" on someone else's credit account. As an authorized user, your son was able to enjoy the benefits of having a card with his name on it. However, you are the primary account holder and, for whatever reason, you got into some trouble. Perhaps you charged up to or over your credit limit or you missed some payments. Maybe the account was charged off and sent to a collection agency.
Whatever happened, the activity is being reported on not just your credit report, but your son's as well. Why? Because he's an authorized user, and that's what happens. Had you used the account well, his credit report would have reflected positive behavior instead, and he would have come out ahead.
Now don't get me wrong, Ola, I'm not implying that you're a bad person. Plenty of people borrow improperly and suffer the repercussions. And it sounds as though you really didn't understand the implications of adding someone to your credit account before agreeing to it. Then again, it appears that you were a little foggy on how to use your credit card well in the first place.
Before I cover what you can do to fix the problems, let me alleviate any worry you might have about your son being responsible for your debt. He's not. When you got the card, the creditor assessed only your financial and personal information. They didn't look at his at all. For this reason, you are the only cardholder who is responsible for the debt. I'm not sure why "they" can't find his name, but obviously he is an account holder. Not only is his name imprinted on the card, but the information is on his credit report.
Thankfully, your son can remove himself as authorized user from your account with a quick call to the credit issuer. When he does, the derogatory data will be removed from his credit report. It will take about a month for the information to be removed, so have him check his credit reports at AnnualCreditReport.com to make sure all is well before applying for a car loan again.
As for you, you've got to clear up this mess for your own credit files. The steps involved are easy, but the process of following them may not be pain-free:
- If you have debt, do everything possible to pay it down quickly. Cut down on expenses or work more, then apply all excess funds to the debt.
- Stop charging until the account is at zero balance and you feel confident you know how to use credit appropriately.
- From this moment forward, pay by or before the due date.
- After six to 12 months of big, timely payments, call your credit card company and request an interest rate reduction. The lower your rates are, the less you'll be charged in finance fees and the more of your payment will go to the balance.
No one is born knowing how to manage money and credit -- you've got to actively learn the skill. More, when you enter into a financial contract, it is your responsibility to know what you're doing. Ignorance is neither bliss nor an excuse.
See related: Cardholders' mistakes can bring down authorized users' credit score, How being an authorized user can hurt your credit score, 11 tips for dealing with debt collection, collectors, Credit card issuers required to 'cure' penalty interest rates
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