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Steve Bucci, the Bankrate.com Debt AdviserBeing an authorized card user can help or hurt

Dear Debt Adviser,
When I left for college, my parents gave me a credit card for emergencies. It was their account and I was an authorized user on the account. I never used the card.

Years later, long after I'd forgotten that my folks had given me the card, my parents fell on hard times and wound up living off the card and then missing payments and finally going into collections on the account. My credit is now ruined to the tune of $9,500 for debt I did not accrue and cannot pay. My parents have promised to pay off the debt, but have not made any steps to do so. I am frustrated and want to be free of their debt. What can I do? Thanks!
-- Jessica

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Dear Jessica,
Take a deep breath, and let's try to put this in perspective. There is more at stake here than just your credit. I hope you don't mind sharing my response with another reader. The timing of your letter coincided with another reader wanting clarification on a recent column regarding authorized users of credit card accounts, and I can answer both of you at once. But first, this part is just for you.

It sounds as though your parents love you very much. They showed their concern for you by giving you a credit card for which they were responsible. You could have been faced with any number of real or imaginary emergencies, and they were willing to put themselves on the line if you needed help. Well, stuff happens to parents, too. My first advice is to cut them some slack and offer to help. Your understanding, or lack thereof, when they need it can color your relationship for years to come.

Now, for you both, what I stated in my previous column is that while authorized users are in no way financially responsible for charges made on a credit card account, the payment history is reported on the authorized user's credit report. As you have found, when the primary cardholder's payment history is not so great, it negatively affects the authorized user's credit report and credit score, even if the authorized user, as in your case, did not make any of the charges to the account.

On the other hand, if a good payment history of the primary cardholder is not for some reason appearing on your credit history and you want or need it to be, contact the creditor and request that the account be listed on your report as an authorized user.

The first thing that I would do is to ask your parents to remove you as an authorized user on the account. The current negative listing will not be removed from your credit report, but any additional negative activities associated with the account after your name is removed, such as a judgment or wage garnishment, should not appear on your credit report.

Due to the fact that you believe your parents are not prepared to make good on the debt, the sooner you have your name removed, the better. If, for some reason, your parents are unwilling to have your name removed, contact the creditor in writing yourself and request that your name be removed. The creditor also might be unwilling, but it is worth a try.

The account should be listed on your credit report as an authorized user. If it is not, file a dispute with all three bureaus and request that it be listed correctly. Although this will not help your score, it can be a positive talking point in future loan negotiations.

One other thing that you may want to do is to add a 100-word statement to your credit report at each of the three bureaus explaining that you are an authorized user on the account but did not use the card or contribute in any way to the unpaid balance of $9,500. If you do this, be sure to remember to remove the statement once the account is no longer an issue or it may raise questions for you down the road.

Should you need to apply for credit before the issue with this account is resolved, I suggest you be up front with all potential lenders and let them know of the negative listing and the history before the lender sees a copy of your credit report. Honesty and communication go a long way with lenders. If all else looks great on your report, this listing should not stand in your way of getting the credit you desire at the rate you deserve.

Good luck!

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation and the author of "Credit Repair Kit for Dummies." Visit MMI for additional debt advice or to ask a question of the Debt Adviser go to the "Ask the Experts" page to ask a debt question.

Bankrate.com's corrections policy -- Posted: April 28, 2006
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