An authorized user credit card can raise your scores – and quickly. Assuming the donor is prudent, and consistent in managing the balance, an authorized user account can be a great adjunct to your credit repair program. But with benefits come risks.
The Way They Work
An authorized user account is a credit card issued in your name based on the credit of another person, or donor. The donor will receive the monthly bill and is fully responsible for the account. As an authorized user, you will inherit the full credit score benefit of the card as if it was your account. These accounts are typically created by parents for their children, who may need the convenience of a charge card when traveling or going away to college. But the donor does not have to be a parent.
Not a Substitute
We like the use of authorized user accounts as a way to give your credit scores a nice quick boost. But they are not a substitute for building your own credit. We do not advocate the use of authorized user accounts for credit repair without simultaneously starting a rebuilding plan, usually involving secured credit cards. If you are a member of our credit repair service we will provide guidance.
The Right Donor
It is important to your pick your donor carefully. It is possible for these accounts to backfire and damage your credit repair effort and your scores. Remember that your credit scores will move based on the behavior of the donor; if they run up their balance, your scores will fall. And if they default, your credit will suffer greatly.
Do Not Purchase Accounts
A recent change to the FICO scoring model included a block on brokered authorized user accounts. How they do this is not public knowledge, but it is safe to assume that FICO, in collaboration with lenders, is monitoring the number of authorized users on an account and blocking those which have over a certain number. The right choice of donor is a friend or relative that cares about you and wants to help you get on your feet. Do not purchase one of these accounts from a broker.
The Risks Involved
As mentioned, if your donor does default, your credit scores will suffer. And you are almost certain to find it impossible to extricate yourself from the situation. If the account is in good standing you can cancel your authorized user status, but if the account goes bad the credit card issuer is unlikely to be willing cancel your status, or to cease reporting the card on your report. So, be careful if you take this path, and remember to build your own credit too!