You remember back when I actually got a credit card of my own just a few months ago? I closed that puppy the MINUTE I got it because it was ridiculously expensive. I’m not in a huge hurry to rebuild my credit score at a cost that high!
And then I read about this idea of becoming an Authorized User.
Lucky me, I have THE BEST friend in the world, with THE BEST credit, upwards in the 800s! I have known this person for over 20 years and I know that both he and I would never do anything to jeopardize the other. I trust this person with not only my life, but that of anyone I know and love.
Here’s what MintLife wrote about the idea:
Enter: The Authorized User Strategy
Consumers can help their credit scores by becoming what’s referred to as an authorized user on someone else’s credit card account.
When you’re an authorized user, the account is added to your credit reports. And, if the account is old, paid on time and has a low balance relative to the limit, it will likely help your scores.
The authorized user strategy is modestly controversial, and I’m being a bit liberal with that designation.
Several years ago, credit repair companies figured out that they could act as brokers and connect consumers who wanted better credit scores with consumers willing to add complete strangers to their credit cards as authorized users in exchange for a few bucks.
FICO added logic in their newer credit scoring systems that addresses that method of “piggybacking.”
The Benefits of Piggybacking
Still, if you can convince a parent or loved one to add you to their card, then you will likely see immediate benefits when it is reported to the credit bureaus.
The best news about this strategy is that there is no blow back on the primary cardholder and the newly added authorized user is not liable for any of the card’s purchases. In fact, the authorized user never even has to get a physical credit card.
When you add someone as an authorized user, the card is mailed to you, the primary account holder. You can choose to shred the card or give it to the authorized user. And, if you give them the card and you don’t like how they’re using it, you can have them cut off.
Finally, the authorized user has no “permissions” on the account, which means they cannot call the card issuer and have a new card mailed to them. It’s really like having a credit card with training wheels.
You might be interested in hearing a little more about my idea to be put on my friend credit card as an “authorized user”.
I’m sure I don’t know everything about this, but I think it can’t hurt. Maybe it won’t work with a BK on your report that has not been discharged. I don’t know!
But here is my score today.
I believe it went down 2 points when I opened and closed that expensive card.
I also think it will be interested to see if there is any improvement as an Authorized User.
Here is another perspective on this idea:
Declared bankruptcy? You can still be an authorized user
By Kim McGrigg
Kim McGrigg is Community Manager for Money Management International, where she provides personal finance education information to consumers.
‘Credit Care’ archives
Dear Credit Care,
If I declared bankruptcy last year, would I be able to be listed as an authorized user on my wife’s credit card account? She has perfect credit. – Adam
Yes, your wife can add you as an authorized user on her credit card account. She can simply call the card issuer and request to add you as an authorized user on the account. A card will be issued in your name that is tied to your wife’s account. I would recommend that you and your wife discuss before the card arrives how — or if — you will be using the card, so you are both on the same page.
Once you are added to the account, the account history will appear on your credit report. Since your wife has perfect credit, the account should be in good standing, meaning she pays on time and as agreed each month and doesn’t exceed more than 30 percent of her credit limit if she carries a balance.
The positive information on your credit report from your wife’s credit card account will help to boost your credit score, but that action alone will not work miracles for your credit history. You will need additional positive information reported to the credit bureaus each month to get you back on the road to good credit.
You might also consider applying for a passbook savings loan with your bank or credit union. These loans are secured by your own deposit with the bank and you repay the loan in monthly installments at a reasonable interest rate. Since the goal is to improve your credit, be sure that your lender reports the loan to the three major credit bureaus — Experian, TransUnion and Equifax. If the account is not reported, it will not help you improve your credit.
A secured credit card might also be something for you to consider. These cards — as the name suggests — are also secured by your money that is on deposit and can be used just as any other credit card. Your credit limit will be based on the amount of your deposit.
With your wife’s account and two accounts of your own, you will be well on your way to rebuilding a positive credit history to balance out the huge negative of your recent bankruptcy. Of course, you must make on-time payments as agreed on the accounts and give it some time. You should see significant improvement in your score in two years or more.
Remember that you cannot be discharged from another Chapter 7 bankruptcyfor eight years following a previous Chapter 7 or six years after a previous Chapter 13. You cannot be discharged from a Chapter 13 bankruptcy for four years following a Chapter 7 or two years after a previous Chapter 13.
I think it is worth a go! The bright side to this is in just 24 months out from Discharge the BK will no longer be on my credit report, I will have minimal debt (student loans), I will have equity in my home and life should be much better financially by then!
2017 feels like a million miles away… but one day at a time!
Today when I got home I had another Credit Card offer in the mail. You would not believe the cost of that CARD! I will show you in another post! CrAzY!!!!