When a parent's 'favor' can ruin your credit
Dear Credit Score Report,
My dad has a business credit card, and I am an authorized user. I have used the card from time to time. I stopped using the card about a year ago and now have this showing up on my credit report as a huge debt and a lot of missed payments. I asked him to take me off of it. Will this keep showing up on my credit once they take me off of it? Will the information on my credit report stay on there or will they take it off? -- Leo
As an authorized user on your dad's small business credit card, you can -- and should -- get his company's mistakes removed from your credit report.
It sounds as if your dad's card was issued in his name, rather than to a business. (This can happen, for example, when the owner of a sole proprietorship applies for a business credit card using his name and Social Security number.) If that's the case, the account activity on that card "could appear on the individual's credit history just as a personal authorized user account does," says Rod Griffin, director of public education with credit bureau Experian. Unfortunately, that account history includes missed payments and debt. Although you aren't responsible for repayment of that debt, it can still damage your credit score. But there's some good news: Those business blunders can be easily removed from your credit report.
While your father's debt and missed payments are listed on the report you saw, they may not appear on all the versions of your credit history. The three major U.S. credit bureaus -- Experian, Equifax and TransUnion -- each maintain their own record of your credit history. In some cases, your credit report may already be clean. For example, "Experian automatically removes authorized user accounts from the authorized user's credit history when negative information payment information, such as a late payment, is reported for the account," Griffin says. Once those accounts come off your report, their associated negative information should, too.
That removal can protect your credit score. In the case of the most commonly used credit score, "FICO scores don't distinguish between personal-use credit cards and business credit cards," says FICO public affairs director Craig Watts. That means both personal and business accounts can impact an authorized user's FICO score. (Lesser-used scoring model VantageScore doesn't include authorized user accounts in its calculation, Griffin says.) While a lengthy account history of on-time payments and good borrowing can help an authorized user, mistakes -- such as late payments and high debt levels -- can have the opposite effect. So if a company runs up large card balances or is in danger of bankruptcy, for example, borrowers may not want to be associated with those accounts.
You've learned that lesson the hard way: Since your dad's business is already missing payments and racking up huge debt, it's a good time to take action. Otherwise, those negative items may remain on your report for seven years.
Luckily, getting your name removed from that account should be an easy process. As CreditCards.com senior reporter Connie Prater previously reported, it generally only takes a phone call to the card issuer. (American Express, for example, says the process is the same for personal and business accounts. For more information, see our chart of credit card issuers' rules for removing authorized users.) The lender should respond to that request very quickly, regardless of whether it comes from the account holder or the authorized user.
Then be patient. Once the bank takes action, it may still take a month before the account comes off your credit report. After you've waited for several weeks, contact the bureaus to request additional copies of your credit reports. Check that the damaging information no longer appears. While you're at it, be sure to also identify and eliminate any items erroneously listed on your reports.
As for any negative items that aren't the result of reporting errors or your father's business, use them as a guide to improving your own borrowing behavior.
See related: Cardholders' mistakes can bring down authorized users' credit score, Decade-old credit mistakes shouldn't appear on your report, FICO reveals how common credit mistakes affect scores, 5 things you should know about business credit scores
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