Do you know someone that has added you as an authorized user for his or her credit card? If so, you need to be fully aware of the possible downsides of being an authorized user listed on another person’s account. For example, did you know that your credit score can be affected if the person listing you as an authorized user suddenly stops making payments on their own card? Guilt by association, I guess…
Although it sounds ridiculous, being an unauthorized user on a credit card with a spotty credit history can reflect negatively on your credit report as well. The most disturbing fact about this is that you, as the authorized user, the authorized user is not required to authorize being listed on someone else’s account. A family member can add you to their account at any time and, if their credit is poor, unknowingly can drag your credit rating down with them.
If someone you know wants to add you as an authorized user, think twice before agreeing. At a minimum, you should find out upfront what kind of credit history that person has. If that person has a history of being irresponsible with their credit, it’s better to avoid any association with that person’s credit history if you’re trying to build or improve your own credit. If you are already listed as an authorized user and that person is having trouble with their credit, missing payments for example, ask the cardholder to remove you as an authorized user immediately.
January 2007, Update: Changes have been made to the FICO’s scoring system that eliminates the benefit of being an authorized user on someone else’s account. This was actually put into place to stop people from paying cardholders with good credit a fee to “piggyback” on their credit scores by adding people to their accounts as authorized users.
Although being an authorized user does not affect your credit score anymore, it does still show up on your file at the credit bureaus. If you’re applyling for a loan somewhere, that information, good or bad, will still be visible on your credit file for the loan underwriter to see. If that information reflects poorly on your credit, add a statement to your credit report that explains exactly what happened to explain your situation. You can use up to 100 words to explain your side of the story and this information will be amended to your report so potential lenders can get an understanding from your perspective of what actually happened.