Many of us have been there. Your score was too low or non-existent to qualify for new credit yet you need credit to raise your score. You are what is called, Credit Invisible. I am here to tell you, there is a simple way to remedy this. But it is important to know the pros and cons before you start the process.
One of the fastest ways to boost your credit score is when someone who adds you to an established credit account as an authorized user. This can raise your score by utilizing their credit history. This technique is called Piggybacking! It is fast, inexpensive and legal. Their credit history on that account may appear on your credit report as an authorized user within 30-45 days.
There are many ways to establish credit once you have pulled your credit report and find out that your score is low or non-existent. They are not always fast. With consistent positive behaviors, your score will eventually grow. Before that, it is expensive to establish credit in terms of paying higher interest rates and possibly even annual fees.
How To Raise Your Score Using Someone Else’s Credit History
Asking a family member to add you to their credit card is a common recommendation by seasoned lenders. I often made this recommendation when I had first time home buyers at my desk with limited credit history.
It can be a simple and effective tactic when trying to raise your credit score and build a credit history fast. You will want to use the accounts that have a long credit history and a low balance for it to have the most impact.
On-time payments from an established credit line by the primary cardholder will help you build a good credit history.
Your credit can be damaged if the person who added you as an authorized user does not make on-time payments or runs their balances too high. If the bank makes you a joint user you are now a responsible party if the account goes into default. I will explain the differences below.
Not all credit card companies report authorized users to the credit bureau. The major credit card issuers such as Bank of America and Chase do report to the bureaus. However, many smaller banks and credit unions do not.
Some credit card companies have age restrictions on authorized users, whereas others have no age restrictions at all.
There are some tips, commonly used terms and information that you need to know before piggybacking with someone.
What Is A Primary Card Holder VS An Authorized User?
There is a primary cardholder and an authorized user. The credit card offer was originally determined based on the primary cardholder’s credit score and information. Therefore, they are the primary person who applied for the card.
Since the credit card company has already qualified the primary cardholder, they will allow the primary user to add someone to the card as an authorized user.
When that person is added, they have the same spending privileges as the primary cardholder. In addition, banks will allow the authorized user to have information about the account.
How Does The Primary Card Holder Add The Authorized User?
They will call the credit card company or bank and let them know they want to add an authorized user.
Let’s be clear! It is not simply a matter of getting a card with your name on it. You will have to supply your information and social security number to report the history on your credit report. You must make sure the bank will report the authorized user to the credit bureaus.
- Some credit card companies have age restrictions on authorized users, whereas others have no age restrictions. Be sure to call and ask about the requirements.
How Long Does It Take For The Credit History to Show Up On My Credit As An Authorized User?
Usually, you will see the account show up on your credit in 30-45 days. If and when it shows up, you will instantly receive the credit history of that card. The benefit is you can gain years of credit history from this one action.
It is important to know there are no guarantees. Although rare, some credit card companies do not allow this practice. You must ask and make sure that the bank offering the card allows this. They may want to add the other person as a joint account holder.
What Is The Difference Between A Joint Account Holder And Authorized User?
The major difference between a joint account holder and an authorized user is the person who has the legal obligation to pay the credit card balance.
The joint account holder is just as liable for paying back the credit card balance as the primary account holder. Authorized users are not required or obligated in any way to make the payments.
Some banks may require you to become a joint account holder rather than an authorized user if you want the history to report on your credit.
Does It Cost Anything To Add Authorized User
Typically there is no cost for adding an authorized user to your account. However, there are always exceptions. For example, the credit card company may ask you to pay an additional annual fee when adding another user.
Pros and Cons Of Adding An Authorized User
You are helping someone get a fresh start! Someone who has no credit file or a bad credit rating can help someone get back on their feet. They can start to build a reputable credit file.
Adding an authorized user means the user can have access to the credit line and your card information. If you give them a card, they can now charge whenever and whatever they want.
I always recommended that the primary user never give the authorized user a card. Then, if there are any concerns over the spending habits of the authorized user, do not give them a card to use.
Pros And Cons Of Being Added As An Authorized User
Yes, there are some cons you need to be aware of. For example, if the primary cardholder, for any reason, defaults, makes late payments, or runs their balances too high, this will affect your credit as well.
I always recommend that Authorized Users work diligently at creating their own credit file to be removed from any piggybacking situation. However, this does not have to be a permanent situation.
A car accident or unforeseen emergency can put anyone at risk for late payments or, worse, complete default. Any derogatory information will be reported on your credit.
- Adding yourself as an authorized user is a fast and relatively safe way of boosting your credit score in less than 6 weeks.
- You can add several tradelines to your credit report using this method.
- An authorized user is not responsible for the debt.
- You can see results usually within 30-45 days, depending on the day of the month it is done.
- It does not have to be a permanent situation.
- Obtaining credit is easier with an established credit history.
This is a great tool for parents or spouses to assist their family members with building a credit file. Whether purchasing a home or qualifying for other lines of credit, you will only have to wait a short time for your file to update.
This can save you thousands of dollars over time in annual fees, inflated interest rates, and missed opportunities. Rather than waiting for the person to establish credit in their own name, becoming an authorized user can instantly change your credit situation until you can establish your own credit history over time.
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