Dear Credit Card Adviser,
I've read that if someone who has excellent credit puts you on their credit card as an authorized user, it can help raise your credit score. If this is true, how does this work?
Being an authorized user on someone else's credit card account may raise your credit score. It depends on how the account is handled, your overall credit history and which scoring model is used to calculate your credit rating.
What you'll see on your credit report is the payment history for the shared account. You won't see other accounts from the main cardholder's credit report on yours unless your name is on those accounts as well. In addition, your credit score won't merge with the other person's credit score because of the shared account. Your credit score only considers information from your individual credit file.
If the primary account holder has paid the credit card account on time and continues to do so while maintaining reasonable monthly balances, the account could have a beneficial effect on your credit score. If the main account holder starts to miss payments or maxes out the card, both of your credit scores could suffer.
However, credit reporting agency Experian only reports positive payment history for authorized user accounts. "If the account becomes negative, we automatically remove it from the authorized user's credit history," spokesman Rod Griffin said in an email.
If you are concerned about the credit score impact of the account, ask the credit card issuer to take you off the account as an authorized user. Since you are not responsible for payments as an authorized user, the issuer will likely honor your request. You also can ask the credit reporting agencies to remove the account from your credit file.
That said, not every credit score formula considers authorized user accounts in scoring. The most widely used credit score, known as the FICO score, does include them in scoring. But it has a methodology in place to minimize score inflation as a result of the controversial practice of "piggybacking" as an authorized user on the credit card account of a stranger with great credit. VantageScore, a rival credit score developed jointly by the three major credit reporting agencies -- Equifax, Experian and TransUnion -- did not include authorized user accounts in scoring in its original version. VantageScore 2.0 does count authorized user accounts.
Because authorized user accounts are not always factored into the credit score of the authorized user, it's a good idea to have some credit accounts in your own name.
If someone else makes you an authorized user on a credit card account, monitor the account to make sure it is not harming your credit score. One way to do that is by checking your credit report periodically. Under federal law, you're entitled to request a free copy of your credit report from each of the three major credit reporting agencies once every 12 months through AnnualCreditReport.com.
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