Dangers of being an authorized user -- Page 2

The Equal Credit Opportunity Act was passed in 1974 with the aim of helping married women, especially those who did not work outside the home, establish credit in their own names. Under the Act, a creditor that furnishes information to credit bureaus must report account information for both spouses on joint credit accounts and on accounts where a spouse is an authorized user.

Years later, commentary from the Federal Reserve Board gave creditors the option of reporting account information on any authorized user.

"You're under no contractual obligation. You didn't apply for credit," says Chi Chi Wu, a staff attorney at the National Consumer Law Center.

"I think this particular provision of the commentary is very troubling."

Of course, things get the most troubling for an authorized user when the credit card account is handled poorly and your credit gets bruised.

And getting the negative information off your credit report may take awhile.

Clearing your name
Step one is contacting the credit card issuer and telling them you want your name removed from the account. A credit card company will then delete your name from the account and report the change to the credit bureaus.

If you make this request by phone, be sure to follow it up with a letter to the credit card company. Keep a copy of the letter for your records.

Because creditors only send information to credit bureaus once every 30 days, it could take weeks before the account information is removed from your credit report.

If more than a month goes by and the account information is still showing up on your credit report, you may want to file a dispute with the credit bureaus.

You can either complete the dispute form provided with your credit report or write a letter. Be sure to include a copy of the letter you sent to the credit card company with your dispute letter to a credit bureau.

A credit bureau must investigate any relevant dispute within 30 days of receiving your letter. Any item that is not verified as accurate by a creditor is removed.

If this sounds like a lot of work, that's because it can be.

Some are spared
Not every authorized user of a card account needs to worry about the possible hits on their credit score. The reason?

Not all credit card companies report account information on all authorized users to credit bureaus. For example, MBNA America only reports account information if an authorized user is a spouse.

If you're not sure of a card company's policy, go ahead and ask. But you may want to pull copies of your credit report anyway, especially if you're planning to apply for a car loan or a mortgage.

Bankrate.com offers tips on requesting and reading your credit report.

It's important to weigh the credit consequences carefully before agreeing to be an authorized user on someone else's account.

"You do want to be very careful," says William Haynes, an attorney in the division of financial practices at the Federal Trade Commission. "Some people are very lax about paying bills even though they intend to pay them."

And a primary cardholder will want to think twice before adding a friend or relative to their card account.

"If you allow someone to be an authorized user, just remember you're ultimately responsible," Rhode says. "If they say they're going to make payments and don't, it's your credit and your responsibility."