‘Authorized user’ credit rules change

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Dear Debt Adviser,
My sister added me as an authorized user on her credit card without my knowledge. She has stopped paying on this account and now it is reported as a bad debt on my credit report.

What steps, if any, can I take to get this removed from my credit report? I was not the one to open the account and have not signed any papers for ownership of this account.
— A. Conner

Dear A.,
My brother would merely hit me when my mother wasn’t looking! Sisters are famous for torturing their siblings in other ways. It might be best to forgive her and move on, as I am sure you have done many times before.

However, you will also need to request that she remove you from the account. Now.

Your letter is timely and helps me address some important new changes in FICO and Vantage credit scoring regarding authorized-user accounts. As part of these changes, new scoring models no longer include authorized-user accounts in their credit calculations. However, such accounts are still reported to the credit bureaus and the information is included in your file.

What does this mean if you are an authorized user on someone’s account?

Many different entities use your credit score for various reasons. For example, those preapproved offers for credit cards you get in the mail are based on your credit score alone. However, if you were to apply for the credit card, the lender would review your actual credit report before granting you the credit card account.

So, the negative authorized-user information that is now on your report (thanks to your sister) does not affect your credit score, but might affect your ability to secure credit or to get the rate you deserve.

How much impact will this negative information have on you? It depends on two factors: other information included in your report and the underwriter reviewing your report.

In your case, it may be worth adding a consumer statement to your credit reports. You are allowed 100 words to explain any negative information that appears on your report. So, go ahead and rat your sister out on your report!

Also, be sure to have your sister remove you as an authorized user on her account. Unfortunately, that request has to be made by your sister, because only the account holder can make changes to the account. That is why I suggest you forgive your sister rather than giving her a piece of your mind. After all, she was probably only trying to help when she added you to her account.

Calmly explain to your sister that remaining on the account could potentially harm your chances to secure a loan and that you would like to be removed, pronto.

Remember, as an authorized user, you are not legally responsible for the account balance. Because your name is associated with the account, you might receive calls if it is placed for collections, but there is no legal obligation on your part to pay anything.

I’d also suggest asking her if she wants to talk about whatever is messing up her credit — and maybe her life. After all, she is your sis. Then, you can sock her when no one’s looking!

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 and select “debt” as the topic.