I’m hoping someone here has some experience with this situation… I recently added my (adult) niece as an authorized user on one of my credit cards, so that she has a card in her name that she can use in emergencies. She doesn’t have bad credit, just not much credit history. Now a month later, and Credit Karma shows her credit scores have jumped by over 100 points! It is treating my credit card as if it were actually her’s - she now has a long credit payment history (much too long for her age, actually), a 100% payment record, etc.
So my question is, is this a bad thing or is this a “shortcut” to helping her establish a good credit rating? If she were to apply for her own credit card or a mortgage, would my good payment history on this account actually help her? Or are these lenders savvy enough to recognize what has happened and adjust accordingly?
This is decades old, but I was a authorized user for my dad’s card when I was a minor. It had his name on it and I signed the signature area. We were so instructed by the CC company. According to them a authorized user would not have their name on the card as they would need to be part of the account. But the signature itself was the authorization. Just to add usually no problems, once and a while a comment, perhaps 1 or 2 questions which I explained the situation and told them they can contact the CC company to verify (none did).
Why did I need a credit card as a minor? I actually had quite a bit of cash income from a business I started, but was not responsible enough to carry cash. I would use the CC instead and pay my dad back when the bill came in.
Authorized users can indeed improve their credit score through a primary user’s account. If the authorized user has other credit history, of course that will also have an effect on their score.
The inverse holds true as well. If either of you miss a payment or do something with the card to negatively affect credit, it will show up on your score although not in equal points because of your individual history with the account.
A more general answer that may or may not be relevant now, in the USA.
From the banks point of view, her credit score is exactly as good as yours, because you are liable for her debt. Also, from a regulatory (bank capitalization) viewpoint, they can’t treat the debt as independent.
Can the authorized user even make payments? If not, then yeah it’s a “shortcut” to get the credit benefits of payment history without forking over any dough.
If they can, does the credit improvement go 50-50 or does it weigh who’s paying how much? In other words, if she chips in a dollar that one time, does her credit show a teensy improvement, or one that reflects improvement proportional to the actual debt carried and paid?
I’ve made payments from my bank account, using my bank’s bill payment service, to credit card accounts for a friend who was having trouble managing her finances. No problem. I was not an authorized user or in any way connected to the accounts.
What they can’t do is report loss or theft, how silly is that? Hubs has one credit card where I have another card but he’s billed for. But when I lost it they would not even speak to me. So I called hubs at work, he called it in, they wanted details, where? When? Etc, so a whole lot of stupid back and forth ensued. It was beyond silly.
My wife and I both had checking accounts, with different banks, before we were married. We turned hers into our “business” account, and everything related to our single rental property goes through that one. I would go in to deposit the rent check every month, plus pay the mortgage. We had new checks printed with both our names, and I wrote checks to pay the rental house related bills. After about 10 years of this, I had some random need to make a cash withdrawal, and the bank wouldn’t allow it. Turns out, we never got around to adding my name to her account. It’s a small town, and the teller had gone to high school with my wife. She knew we were married. I was quite impressed at her adherence to the bank’s rules of withdrawals, but they unhesitatingly accepted checks made out to me, that I endorsed in front of them, into an account I apparently had nothing to do with for years.
At my business, I often get checks in the mail for payment. I regularly will get checks from people I’ve never heard of. Usually they will have a name or invoice number on the check, or a copy of my invoice, so I know whose account to apply it to. Often times I’ll have to search the amount, or the address on the check, to see if I can match it up. Sometimes it comes down to calling the check-writer and asking.
I’ve never asked or cared why these people are making payments for my clients, and I would doubt whomever (or whatever machine) opens the envelope at the CC payment processing center does either.
