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Topics addressed on July 11, 2007:
Credit score changes may affect authorized users
I have heard that you will no longer be able to add authorized users to your credit cards. Is this true or false?
It is false. You still can add authorized users to your credit cards.
An authorized user is simply a person to whom you have given permission to use your credit card account. The individual has no responsibility for the charges they make or for paying the credit card debt.
The intent of the service is for you to add a small number of people, such as your children, so that they can use your credit card for convenience and as an opportunity to learn how to use credit before they apply for cards in their own name.
In addition, being an authorized user on a credit card could have helped a person build a positive credit history because the account and its positive payments were added to the authorized user’s credit report and were subsequently counted in credit scores.
Unfortunately, some have introduced schemes that abuse this service in an effort to falsely manipulate credit scores.
These “piggybacking” schemes charge people with poor credit hundreds or even thousands of dollars to purchase authorized user relationships from strangers, claiming that by doing so they could greatly improve their credit scores.
Lenders view such schemes as credit fraud because the individuals are creating a false credit history, which does not reflect the way they truly manage their credit. If lenders open accounts based on an inaccurate risk evaluation, there is a much greater chance the accounts will go bad. My opinion is that the rest of their customers you and I will have to pay more to cover the lender’s losses.
There are reports that some government agencies are looking into whether it is credit fraud and potentially a violation of the Credit Repair Organizations Act. No government action has been taken at this time, but that may be a moot point.
Abuse of the authorized user relationship by these piggybacking schemes has caused credit score developers to change their systems so that authorized user accounts will no longer be recognized after businesses have upgraded their systems, and so will have no impact on the resulting credit scores.
Sadly, this abuse of a very positive service has hurt those who used it as intended. While you can still add authorized users to your account, there will be no positive influence on their credit scores.
Thanks for asking.
- The "Ask Experian" team