Case Study: Build Credit for Someone by Adding Them as an Authorized User

add_authorized_user_to_build_creditWhen I first purchased my condo three years ago, I was not offered the lowest rate due to my insufficient credit history. Even though I always checked my credit score and it was in the high 700′s, the bank considered me a slight risk because my credit history was so limited(I was only 22). I thought my mom was doing me a favor during college by opening a credit card for me in her name but once I canceled it and opened my own card, all that history was gone.

In retrospect, I should have asked her to add me as an authorized user to her account. If you are the one being added as an authorized user, you’re able to ‘piggyback’ off of someone else’s established credit line. The authorized user can receive statements and pay their own bill, but ultimately, the main card user is responsible for any charges made by authorized users. Personally, I would only give out a card to someone I trust since in the end, I’m on the hook if they don’t pay.

There are a lot of stories out there of boyfriends/girlfriends(or even husbands/wives) being added as authorized users and racking up the bills when things go south. If you check your accounts daily, or weekly, or even monthly with Mint you don’t need to worried about this though. I would only add someone as an authorized user that you trust or that you dont mind staying on top of. If you’re the one adding authorized users, remember that you are assuming all of the risk.

How Does It Help Your Score?

Every time you add an account to your credit history, your score will increase. Contrary to popular belief, the more accounts you have the better(as long as they are managed responsibly). This shows to the credit bureau your trustworthiness since so many different lenders are willing to extend you lines of credit. When you become an authorized user, you will be issued a brand new card with a new 16 digit number and even a separate billing statement.

Depending on the average age of your accounts, adding an authorized user can help this facet of your score. If you are added onto a card that has a 15 year credit history, this will now factor into the calculation of your average age. And the same thing goes for the credit limit. If you can find someone with an extensive credit history and a high credit limit(think parents!), you should ask them nicely to become an authorized user on their account. You don’t even have to use the card, but just having it on your history will help a ton. But remember, if they ever close this account your account will be closed too, thus negatively affecting your score.

No Credit Check? No Way

Almost all of the benefits of adding an authorized user go to the authorized user, fortunately or unfortunately, depending on whom you are. Most credit card companies won’t even ask for a social security number for the authorized user. In fact, they claim they won’t even perform a credit check when you add an authorized user, all they ask for is a name and date of birth.

I have always thought you needed a social to get a hold of anything credit related, but apparently I was wrong. I signed up for a department store charge card once and although I gave them my address, I did not give them the correct social security number. But somehow, this card ended up on my credit report, haha! So even though you don’t give out your social, you can still expect it to show up on your credit report.

Real Life Experiment

I was curious to see how the whole process worked so I decided to add my girlfriend to my AMEX Gold as an authorized user. It’s a charge card, so there’s no monthly limit, but I wanted to see how it would affect her score. I added her as an authorized user on 10/1 and all I gave AMEX was her name and date of birth. I specifically asked them if there would be a credit check and they told me NO.

A few days later, I got a Credit Sesame notification that an account had been added to her credit history. Sure enough, there was no inquiry either. When I pulled her credit report from Annualcreditreport.com I saw a new account with Amex with an opening date of 10/1/12. So it looks like, TransUnion at least, did not give her the date that I opened the account(two years ago). I think this aspect may vary by card issuer and credit reporting company though.

After all was said and done, her score went up four points. I think it definitely would have helped more if I added her as an authorized user to a card with a high limit and longer history. I think I may have actually hurt her score a little bit in the average age department, but I helped it in the total number of accounts. Overall, it was a good experiment and I think I’ll have to do another with a different card, with her permission of course.

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Readers, have you ever added someone as an authorized user? Did it help your score, help their score or hurt their score? Let me know so I don’t have to keep experimenting with my girlfriend’s credit history.

-Harry @ PF Pro

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Hi, I'm Harry, the owner and head writer for Your PF Pro. I started this site back in 2011 in order to create a place where young professionals could come and get all of their financial questions answered. On the site, you'll find articles on everything from asset allocation for retirement to saving money at Chipotle! So enjoy..

Comments

  1. says

    She should appreciated being used as a guinea pig for this experiment because it shows you care about her financial well being :0) Interesting results, I wonder if others can duplicate it. I don’t have anyone to add to my credit cards, but I want my future children to start developing a credit history at an early age.

    • says

      Haha yes that’s what I told her. That’s probably the best use I can think of for adding an authorized user. As soon as your kids turn 18, add them and as long as you have the card open you’ll be helping their score..

  2. says

    Gods stuff here. On our Halloween podcast episode, Carrie Smith tells that you should watch out doing this with someone who has a similar name. Her sister has the same first initial and the credit bureaus started calling her sister her alias! They were combining their credit histories….huge mess.

    Otherwise, this is a great way to help someone you trust build credit.

    • says

      Interesting, something similar happened to me. Someone with the same name as me somehow got their Amex added onto my credit history and they had a 20k balance but were making monthly payments. I eventually told them to check the SS# and then they removed his account from my history, close call, haha..

    • says

      Ah man, that sucks! I think it’s still a good idea though if you want to help someone out. Just add them as an authorized user and don’t give them the card. They don’t have to use it in order to build credit. Just make one purchase every 6 months or so and you’ll get all the benefits of helping them build their credit without the risk of something like, them bailing out on you, happening.

  3. Piggyback Newbie says

    Read this a few days ago and decided to ask my parents. I don’t have anything negative on my credit report, one car loan that I got 10 months ago, that’s it. This is obviously hurting me, scores are 570,573,609. My parents are wealthy and have high credit limits.

    Considering the info I have shared, what kind of outcome should I expect? I’m 31,just always used cash.

    If I apply for credit cards after my parents cards are on my report, what can I expect, low interest high limit like theirs?

    Thanks for the help.

    • says

      Hi Piggyback, opening a car loan shouldn’t hurt your score. In fact, it should help it since you’re opening a new type of credit loan and you had nothing before. I’m surprised that your scores are so low since you’ve never had a line of credit. Usually, you aren’t punished for not having lines of credit, you’re just not rewarded with a high score. I would use a free site like annualcreditreport.com to review your credit report and make sure everything looks ok on there.

      As for building credit, you should definitely ask your parents to be added as an authorized user on their highest limit and oldest card. Depending on the card carrier, you may or may not get the same account age as them. But even if it shows up on your credit report as a new account, you should get the same limit as them which will definitely help the utilization aspect of your score. Your credit score won’t magically shoot up, it’s going to be a couple year process so be patient.

      As for applying for a new card, I would wait a month or two until after you’ve been added as an AU on 1 or 2 cards and then apply for a very basic no annual fee card like B of A 1,2,3 or Chase Freedom card. I bet you’ll get accepted but with a low $500-$1,000 limit. If you are rejected for some reason, look up the reconsideration line and usually you can argue your case and they’ll accept you over the phone. That will be the first step to building your credit. Does that all make sense?

  4. Piggyback Newbie says

    Thanks for your help, I have asked them to add me as a au on all their cards. Hope this isn’t bad. They added me on 6 to 8 cards, lowest limit being 50k. Youngest account being 15 years old.

    Thanks again.

  5. Piggyback Newbie says

    I’ll keep you posted! As far as me getting my own credit card, what can I expect to get. Would love to be able to get a decent class and stop using my debit card for everything.

    • says

      I really think you need to check your credit report first to make sure everything is clean and makes sense. From there, I would start doing some research on forums like my fico or similar financial/credit type forum. I am not an expert on the subject, but there is good information out there. The one thing I would recommend is do not pay for anything. All of this information is available for free. Go sign up for a credit karma/credit sesame account, pull your credit report, etc. That will help you manage your credit for free from here on out.

      After a month or two, you should see an increase in your score from being added as an AU on your parent’s cards. Then I would apply to a very basic card like the ones I mentioned above, basically the lowest card at the big companies like Chase, Citi, etc(no annual fees, low limits, etc). If you can’t get one of those for some reason, I think store cards like target and best buy are easier to get and they will report just the same as a regular card. It won’t happen overnight, but I suspect within a few years you’ll be at 700+. Here are some links to my other articles on credit:

      http://yourpfpro.com/my-do-it-yourself-identity-theft-protection-plan/

      http://yourpfpro.com/knowing-your-credit-score-and-building-it-up/

  6. Interested Piggybacker says

    I’m very interested to see how that piggy backing turns out in a month or so. Please post piggybacker!

    Thanks!

  7. says

    There are many little tricks that can help you improve your credit score. This method mentioned by Harry will certainly work and help rebuilt credit. For individuals who have bad or no credit, you can’t start improving your credit if you can’t get credit in the first place. A little catch-22. However, finding someone you trust who is willing to add you as an authorized user will definitely help.
    Pat Drummond recently posted…Free Credit Report Canada: 3 simple ways to get a free report and scoreMy Profile

    • says

      Thanks for stopping by Pat. I agree with you, they definitely make it tough to build your credit but I think this is one of the easiest ways to get started. I think it’s actually finding someone who trusts you that’s the difficult part since they are the ones held liable should you skip out on the bills. If I was in that situation I’d look for someone older who trusted me or someone that didn’t mind opening it for me. Heck you don’t even need to get the card, just have someone open it for you if no one trusts you :)

  8. Danielle says

    Will adding someone as an authorized user to my credit card hurt my credit score in any way? I want to add someone but he wont have the card so I dont have to worry about him racking up charges (not that he would). I just wanna help him have a positive credit history to bring his score up.

    • says

      No it will not hurt your score in any way. There is no hard pull and it will only show up as a sub account on your credit card issuer’s summary of accounts. It won’t show up on your credit report. I think that’s a good idea though. You should add your friend to help them out but not give them the card. Just make sure you make a charge once every 6 months or so since some cc companies will close accounts due to inactivity.

  9. Taryn says

    Hey Harry,

    How about helping me! I am trying to buy a home and need 40 points. It sucks because my highest score right now is a 725 but that’s not the score the lender looks at unfortunately. I have a cc but was told since its new it really won’t report right away and need to show some history.

    • says

      Interesting predicament. Know anyone that will let you be added as an AU? If you open up a new credit card that usually won’t increase your score since it lowers your average age and gives you an additional hard credit inquiry.

      I’d probably try and find a different lender, do you have to use a specific one or are you willing to shop around? There are tons of options when it comes to lenders and they should all be competing for your business. So I’d look for one that will use your 725 :)

  10. Taryn says

    I wish, I have absolutely no one to help me on that note. As far as choosing a different lender, not an option because this lender is offering 100% financing. I do need a “go getta” realtor though.

    • says

      100% financing?! Can you give me some details on this lender haha(yourpfpro@gmail.com)? I know they offered these back in 05 but haven’t heard of any since the housing bubble crashed.

  11. Dorothy Moran says

    If I have someone added to my credit card accounts as an authorized user and they later have issues with their own credit (not related to my card) will it have a negative impact on my credit?

  12. James H says

    Hello, Great post!
    My credit is quite shotty, I have three credit cards that I really screwed up with.

    My friend just started building his credit and has a Capital One card coming in the mail with a $500 limit. He is willing to put me on as an authorized user. Would this benefit my credit?

    • says

      Hey James, no worries you’re on the right track to re-building your credit. Do you currently have any cards? If your current cards have higher limits and are older than a year or so being added as an AU on your friend’s card might actually hurt your score in the immediate future. Eventually, it would help boost your score though for sure. If you don’t have any cards then it will help your score a little to start and more and more as the card gets older and as his limits increase.

  13. Concerned mom says

    Great post! I want to add my daughter to my accounts to build her credit, but i’m afraid she isn’t the most responsible person in the world. If I had her will her name show up on my billing statements?? Don’t want her seeing he name on the bills and getting any ideas.

    • says

      Thanks! Her name will show up on the billing statements(but under a subsection usually, there won’t be any bills addressed to her) but that doesn’t mean you have to give her the card. I added my fiancee and brother to help build their credit but I never even gave them the cards. I just hold onto them and make a purchase once every 6 months or so with their cards.

  14. William Scott says

    Harry, Harry, Harry. This experiment was unnecessary. It has all been done. FYI AMEX will give her the old date if she asks nicely… Over and over until someone says ok. For more info check out a forum called creditboards.com

    • says

      It’s already enough work following the boards on slickdeals and Flyertalk but I guess I could add one more. Where do you suggest I start, there are 300k topics in the Credit Forum haha.

      Anyways, never hurts to try something out yourself. She should call AMEX and ask them to change the opening date on her card? Or do I need to do it.. confused

      TIA

  15. William Scott says

    It is lucky that it is an AMEX card that you tried. AMEX is the only company that allows backdating, but when you ask never use the word backdating. She should call and tell them that she wants the date on her card to reflect the original date of the account being opened. As far as creditboards is concerned I recommend you hit the search bar and type in AMEX backdating. There are people around whose credit reports show that they’ve had an AMEX card like 15 years before they were born.

  16. William Scott says

    I’m sorry I forgot to mention the most beautiful part. If she in turn gets her OWN SEPERATE AMEX card. She can then request for it to also show it as having been opened on the date YOU opened YOURS. So (heaven forbid) you guys don’t work out, and you boot her off of your card, her own card will retain that earlier date. It’s all a big secret and I’m spilling the beans, but check it out.

  17. Ruben says

    I added someone as an authorized user to my Amex card and Credit Karma said there was a hard inquiry. Why did this happen and what can be done about this?

    Thank you.

    • says

      Hi Ruben, did you provide your AU’s SS#? There can’t be a hard inquiry without this, Amex(nor any other CC company) generally does not ask for this when adding an AU. Either way, is the hard inquiry on your account or your AU’s? I would double check to make sure that the inquiry was truly from adding the AU and not some other action.

      If it was indeed pulled in error, you can contact the credit bureaus and ask them to remove the hard inquiry but you’ll need some type of letter/evidence from Amex and the trouble may not be worth it.

      Look forward to your reply.

  18. Sarah says

    I was added as a piggyback account holder in 2001 on my parents account. I used the card in college and gave it back top them upon graduation in 2003. I wasn’t aware that my name was still attached to the account until recently, when my credit report was pulled for purchasing a house with my husband. My parents made a few late payments and has effected my credit. The account has been closed as of last year. I called the bank and they have removed my name as of today. Any ideas on when this will show on my credit report? It will it be reflected negatively for a while. Our mortgage rate will be higher by 1/4 of a percent and a higher home insurance cost. Thanks for any help or insight you can provide. I wish I could have helped them pay the minimum, but wasn’t aware that I still was attached.

    • says

      Hi Sarah, this is a tricky situation but I think I have an answer for you. Normally, when you want to be removed as an AU your parents would need to contact the CC issuer and ask them to remove your name. I’m a little confused if this has been done yet or not since you said the account was closed last year(parents’ account?), but you asked the bank to remove your name today. Either way, once you’ve been removed as an AU the CC issuer will no longer report you as an AU so you will lose the benefit of being an AU(in this case, I think the negative of late payments outweighs the 12 years of credit history but this is something to keep in mind).

      The next step would be for you to contact the credit bureaus(I’d ask your bank which ones they are pulling from or you could just do all 3) and let them know you’ve been removed from the card and you want to have that account taken off your report. The credit companies like Experian and Equifax only report what’s given to them, so it’s easy for them to add new accounts but they won’t remove anything unless you ask(which is why you can see old closed credit card, student loans, etc on your credit report). After a month or so, your report should be updated and you’d be able to get the lower rate.

      For the future, you can use annualcreditreport.com to get 3 free credit reports every year and sign up with Credit Sesame to get a free score and monitoring.

  19. Victor says

    Hey,

    I recently was inquiring for a new car about 6 months ago, no one would approve me. I needed one terribly bad so I was trying for about two months until I got the message I am not at all credit worthy for a car. For the last two months I took it upon myself to begin disputing collections and charge offs on my account to my surprise I was able to remove 50% of them from my credit reports so far. My girlfriend is now considering adding me as an authorized user to her cc of three years and good history. Once she has completed the dad for me…What do see for my chances of getting this new vehicle ($23k) if I still have 15 inquiries sitting on my report?

    • says

      Hey Victor, well lenders typically look more at your score than your inquiries (although inquiries obviously make up a portion of your score). I can’t say whether you’ll get a new vehicle or not but I would say you’re definitely headed in the right direction. The inquiries drop off after 2 years but you may not be able to wait that long. In that case, getting added as an AU and disputing delinquent accounts should help. My advice would be to try and get a loan from a few different lenders (big bank, CU, online bank, etc).

      As a side note, I have heard that Uber is financing cars for people with bad credit if you’re willing to drive a certain amount for them. Information has been hard to come by but it could be something for you to look into. Check out my other site at http://www.therideshareguy.com for more info on rideshare driving.

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