Authorized User Accounts

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Authorized User Accounts

For many years adding someone on as an authorized user to a well-established account was the mecca of instant credit score increases and instant approvals.

Adding authorized users became widely known the great impact of adding additional accounts with high credit limits and lengthy history. a new business model was quickly created- “Tradelines for Sale”. Therefore vendors contracted with credit worthy consumers to “Rent” their positive account history to consumers in need of a quick credit boost for a fee.

Adding Family

Adding a child or relative to an account to help them establish or re-establish a credit history is considered morally and ethically acceptable in the credit industries. Personally, I’ve been an authorized user on my father’s credit card that is 23 years old. I was 6 when this account was established!!!

In the family example the additional user will have access to utilize the account to use it for daily expenses. However, in the tradeline sale/rent business the purchaser/renter of the account typically has no access. They are simply adding the account for an instant boost and will typically remove it directly after loan approval.

As with any “Quick Fix”, it doesn’t last forever… Credit reporting agencies and creditors constantly review data trends and consumer behavior. Review of consumer data was most likely prompted by an increase in default for consumers that “had” or“have” an authorized user account.

Consequently, creditors have recently reported the addition of internal procedures for monitoring authorized users to account holders. Creditors have openly stated they had no idea the magnitude of this abuse until they added these new internal monitoring and reporting functions.

FICO 08 Implementation

The abuse of this part of the system was easily recognized and now is being remedied. In the FICO 08 scoring model, authorized user accounts are supposed to be eliminated from the scoring of consumers that have these accounts.

It is important to note that many creditors use different models to determine creditworthiness. 

Universal implementation of FICO 08 can take years. In the interim many credit issuers and lenders have already instituted new procedures for underwriting credit risk approval for consumers that have authorized user accounts.

For example, An account is 10 years old with a 0 balance and a credit limit of 10k. It had a late payment 2 years ago. The account has a far greater positive impact for the 0% utilization and the 10 year account age than the negative impact of the late payment 2 years ago.

The consumer has no financial indebtedness of the account. Therefore they have full rights to demand that the account information be removed. If the account has negative information, it is important to weigh the negative with the positive account data.

Review age, utilization, status, payment history of all authorized user accounts and determine if they should be removed.

Contacts us if you need help with determining if an Authorized User account is right for you.