Credit scores: Can another card user hurt your credit rating?
Helping your spouse or kids establish credit by 鈥減iggybacking鈥� on yours is a nice thing to do. But is it wise? Here鈥檚 an email I recently received鈥�
Is my credit being affected by adding my young adult daughter as an authorized user on my credit card? She doesn鈥檛 actually have a card in her possession, nor is she using it in any way. But they told me she would benefit from my monthly payoffs of the card. I wonder now if I am also tied to her credit in any way. Although not bad, there just isn鈥檛 much to go on as of yet. She is very responsible and hard working and quite trustworthy. However, I鈥檓 not naive enough to know that none of us can predict the future. What do you recommend?
听Thank you!
听鈥� Trish
Here鈥檚 your answer, Trish!
First, don鈥檛 worry about your daughter鈥檚 credit (or lack thereof) hurting or otherwise affecting yours. When you allow someone to become an authorized user on your account, they鈥檙e linked to your credit, but you鈥檙e not linked to theirs.
While allowing your daughter to take a ride on your credit history is a nice thing to do, and it certainly can鈥檛 hurt, don鈥檛 expect miracles. Since your daughter isn鈥檛 liable for the bill 鈥� it鈥檚 still your sole liability 鈥� the boost to her credit may not be as great as you think.
Here鈥檚 what credit reporting agency Experian on the subject. It鈥檚 about adding a spouse, but the idea is the same鈥�
Including your wife as an authorized user will help her establish a credit history.
Authorized user accounts are included in a credit report and can be considered when making lending decisions. However, an authorized user has no responsibility for repayment of the debt. For that reason, they often have less bearing on a lender鈥檚 decision, and may not be included in some credit score calculations.
Although authorized user accounts are not always included in credit scores, they will result in a credit history being established and eventually can help your wife qualify independently for her own accounts.
In addition, in order for an authorized user to benefit from someone else鈥檚 credit history, there should be a credit card issued in their name. You say, 鈥渟he doesn鈥檛 actually have a card in her possession,鈥� which I鈥檓 reading as: A card exists, but she doesn鈥檛 physically have it. If so, that鈥檚 good. Without a card issued in her name, FICO 鈥� generator of the most widely used credit score 鈥� won鈥檛 count it when they compute her credit score.
What would be more beneficial to help your daughter establish credit is to have a joint account with her. That means you establish a credit account using both of your credit histories, and she鈥檚 equally responsible for the debt. Obviously, these types of accounts are potentially more problematic, but if you treat it the same way as you are the current account 鈥� allowing her no access to the card 鈥� it should be relatively low risk.
Keep in mind, however, that if she does end up with a credit card in her purse, your credit will be vulnerable if bills go unpaid. As a joint account holder, she has full access and full responsibility for the debt. Which means there鈥檚 nothing preventing her from simply calling the issuing bank and requesting a card. So you鈥檇 want to do this only in situations where you feel comfortable that won鈥檛 occur.
What if the unthinkable happens? As a joint account holder, you can call the issuer and close the account to new purchases, then cancel the account. (See my recent post ) But as anyone who鈥檚 had a credit card knows, it doesn鈥檛 take long to rack up some serious debt. So tread cautiously.
Stacy Johnson is the president and founder of听 , a consumer/personal finance TV news feature that airs in about 80 cities as well as around the Web. This column first appeared in Money Talks News.
