Sharing credit puts everyone at risk

Authorized users and co-signers make mistakes... at your expense

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question for the expert

Dear Credit Guy,
I know that an authorized user on a credit card account can help the authorized user's credit if the account owner's credit is in good standing. But, my question is can an authorized user hurt the account owner's score rating by not having the best credit? -- Tamar

Answer for the expert

Dear Tamar,
I like the fact that you are considering how getting involved with another person in matters of credit will affect you. In this particular case, the authorized user's credit history does not have any affect on the credit card account owner's credit history. Here's why: The only way their credit is connected is through that one account. The account owner has control over how the account is managed. So, the owner's credit would only be negatively affected by that account if the owner did not make payments on time or otherwise mismanaged the account.   

There are ways, however, where an authorized user's actions could possibly negatively affect the owner's credit. That would happen if, for example, the authorized user charged a large amount on the credit card account, which resulted in the owner of the account being unable to pay the minimum amount due. However, how the authorized user handles his or her other credit accounts would not impact anyone else unless another person is also financially responsible for the accounts (as in joint account holders).

This brings me to the point I want to make about combining your good credit with the credit of others. In most cases, any time you do so can put your own credit at risk. As in the example above, you cannot control other people's actions, so you want to avoid situations where other's actions can negatively affect you and your credit. If you are not sure whether or not a potential authorized user will be responsible with a credit card, don't allow them access to your account.

The biggest mistake I see with co-mingling of credit is co-signing for a loan. Most co-signing is done between family members or loved ones and has the potential to not only ruin credit, but relationships as well. The biggest danger in co-signing is that as a co-signer you are a responsible party on the loan and, as such, are agreeing to pay the loan if the other person does not. The loan is reported on your credit report as if it were your own.

Often the co-signer is not aware that payments on the loan have not been made by the other party until the account is severely past due. By then, the co-signer's credit has already been significantly affected, and the lender is contacting the co-signer wanting to know when they can expect payments to be made. Or, in the rare case where the co-signer can keep up with how the loan is being paid, if the other party cannot make payments, the co-signer must then make the payments. If the co-signer cannot make payments, his or her credit will be negatively affected.

The bottom line is if you want to protect your own credit, it is best to avoid any co-mingling. If you decide to combine your credit with someone, be prepared to face unpleasant consequences if the other person's adverse actions create a problem.

Take care of your credit!

See related: Authorized users aren't liable for card debt, Daughter's card abuse hurts mom as authorized user, Cardholders' mistakes can bring down authorized users' credit score, Act fast to remove authorized users when your credit goes south

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Updated: 03-24-2019