- advertisement -

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.

 

- advertisement -

"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
   

 

 
 

 

Looking for more stories like this? We'll send them directly to you!
Bankrate.com's corrections policy
Print  
 

Credit Cards
Compare weekly rates
WEEKLY AVERAGES
Type Fixed Variable
Standard 13.23% 14.82%
Gold
Platinum 12.70% 15.89%
All 13.02% 15.61%



RELATED CALCULATORS
  Loan calculator (includes amortization schedule)  
  See your FICO score range -- free  
  What will it take to pay off your credit card?  
VIEW ALL 

BASICS SERIES
Credit Card Basics
Don't get trapped by card debt. Learn to use it wisely.
How to find the best card
Check your credit report
Finance charges explained
How to ask for a lower rate
Improve credit with a card
How to repair your credit

MORE ON BANKRATE
Banking glossary  
News archive  
Keep an eye on the leading rates  
Find a high-yielding CD


- advertisement -

 
- advertisement -