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Good Credit Advice: The Gift That Keeps on Giving

If your significant other’s credit rating being less than yours is a sore spot in your relationship, give it a boost by learning from your good credit.

Here’s how you can leverage your good credit to help your spouse, child or close relative:

1. Understand the difference between authorized user and joint account holder

When you add someone to your card as an authorized user, it’s very different than opening a joint account with someone. A joint account involves shared responsibility and complete shared ownership of charges (and usually also means you both have to get approved based on your current standing).

If you open a joint account with someone, you generally won’t be able to remove them. You’ll have to pay off the account and open a new one or transfer the balance to a card just in your name.

An authorized user is different. You can call up a credit card customer service line and add the person without keeping them on there forever. They’re authorized to use your account, but you can make a decision to remove them at any time. You can also decide to have the card sent to you and cut it up. Then it’s solely used for credit history.

The other difference between authorized users and opening a new account as a joint account holder is that an authorized user’s credit is affected by your full past credit history.  For example, you add someone to a credit card account that’s been open for 18 years, has only a $100 balance out of a $3,000 limit and you haven’t missed a payment in 7 years.

This kind of history would likely help anyone’s score, which considers length of credit history, utilization rate (percentage of your credit limits you’re using), and payment history. A new account as a joint account holder would still help with utilization rate numbers and payment history over time. (See also: What Are the Different Scoring Ranges?)

An authorized user situation can usually help credit ratings faster because that person benefits from the credit history on that card, too. When looking at a FICO® Score powered by Experian, 15% of one’s credit rating is based on length of credit history. The amazing part is you can actually help your 18-year-old child work towards a higher credit score with a credit history even though they’re younger.

2. Buy a product for tracking and improving credit

If you aren’t ready to make your significant other or child an authorized user on one of your accounts—or just want to do something extra beyond adding them as an authorized user—consider giving the gifts of a credit monitoring product.

The $5 to $25 monthly you pay can help them by providing alerts and information so they can work on their credit quickly. (Some things will just take time to fall off if there’s been a big mistake in the past, though.) If building a life together with potential mortgage payments and shared retirement, it’s an investment in you, too. The ideas may be as simple as paying everything on time or paying down a card with a low balance.  

You can encourage them to dispute fraudulent or misreported information. For instance, there could be misreported late payment that caused their score to drop over 10 points. The first step is reviewing their credit report, which is usually available from Experian or the other credit bureaus and through annualcreditreport.com.  

Don’t forget to give advice. There are reasons why your credit is so great. Share your tips with the ones you love. The advice you give may save them thousands in higher interest rates over the course of their lifetime. (See also: 11 Credit Myths: Don’t Fall for ‘Em)

Consider all decisions of tying someone else’s credit habits carefully. But with careful planning and consideration, you can find the right way to help them understand what impacts their scores and maybe even help your relationship along the way.

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