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Dangers of being an authorized user

Being an authorized user on someone else's credit card account certainly has its perks. But it has its problems too.

You get all the purchasing power you want as an authorized user, and the primary cardholder, not you, is contractually responsible for the bill.


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"What you're gaining is the convenience and the privilege of using someone else's credit card account," says Steve Rhode, president and co-founder of the financial management organization Myvesta.

Still, authorized users of credit cards don't get away scot-free. There's a pretty serious credit catch that most people don't know about.

Guilty by association
Even though you never applied for the card and you're not responsible for the card's payment, the card account and its payment history may still be recorded on your credit report. Once there, the account will carry just as much weight as a card account opened in your own name.

Being an authorized user on a well-managed account with a long payment history could boost your credit rating. But if the account goes unpaid, your credit score could take some serious hits.

An unpaid account on your credit report is an unpaid account. The authorized user designation on the account hardly matters.

"If you're an authorized user on a credit card your FICO score reflects that account in the same way a primary user's FICO score would reflect it," says Craig Watts, consumer affairs manager for Fair, Isaac and Co. based in San Rafael, Calif.

Some lenders will even slap bankruptcy information for an account on the credit report of an authorized user. Yikes.

Wondering what gives creditors the right to report account information on an authorized user's credit report? You have to dig deep in the commentary of Regulation B, which implements the Equal Credit Opportunity Act to find the answer.


-- Posted: March 12, 2003




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