The practice of adding an authorized user to your credit card to help someone build his credit or increase her credit score has been around for a long time. It was originally most prevalent with parents trying to help their children with their credit history. This is also very common among spouses, for both convenience and for one spouse to help the other with their credit worthiness. Even partners, other family members and close friends frequently made use of this valuable arrangement.
Though adding an authorized user to the card of an individual with great credit can be an excellent method for building credit and increasing the authorized user’s credit scores, it isn’t always effective, and it shouldn’t be used in every situation.
When the practice moved into a profit making endeavor, the term piggybacking began to crop up. This is very borderline activity and greatly frowned upon by lenders. Moreover, FICO and most card issuers began taking steps a few years ago to discourage and invalidate this practice for non-legitimate authorized users seeking to defraud the card issuers with artificially elevated credit scores.
This is a very involved subject and to best explain all the ins and outs, and the pros and cons, it’s necessary to first explain some basics.
A Joint Account and an individual account with an authorized user are two entirely different credit card arrangements. Both set-ups can help build credit in a very similar manner, but the legal liabilities are quite different. This impacts how both parties’ credit may be impacted.
Both individuals on a joint account are responsible for the debt incurred. When applying for the card account, the credit of both parties is evaluated to determine eligibility, annual percentage rate, credit limit and other account terms and conditions. Both card holders are owners of the credit card account. They share the legal responsibility, privileges and accessibility. Any late payments, defaults and other card activity is shared by both individuals. Either cardholder can make changes to the account without the permission of the other. However, both parties are still legally obligated to fulfill the terms and conditions of the card and any changes made by either party.
If you have a credit card and add someone as an authorized user, you are and will remain the primary card holder. The privileges and responsibilities of your authorized user are limited – though this limitation does vary from one card issuer to another. Ultimately, as the primary card holder, you are the responsible party and the owner of the account. Only your credit history is reviewed when your card issuer determines your account terms and conditions, to include the APR, credit limit and any special offers. Your credit card issuer will turn to only you to pay your card bills and hold you accountable for any account activity. If your authorized user runs up your card limit, the issuer will not require him to pay the bill. That falls to you. On the other hand, as the primary card holder, only you can make changes to your account, which, dependent upon the card issuer, includes limiting the amount of credit available to your authorized user and removing him from your card should you choose.
Joint accounts have various benefits, and building credit is definitely one of them. Though this method is more difficult than simply adding an authorized user to the account of someone with an excellent credit history.
You can create a joint account in one of two ways:
1. Apply together at the origination of the credit card account. This is fairly common with spouses and couples who have merged their finances and wish to apply for a new credit card. Another popular motivation for this is to help someone you trust get a better rate, build their credit and increase their credit score.
2. Change your individual account to a joint account by “re-applying” as joint account holders. If you already have had a credit card for a period of time and you wish to add another account holder, you will need to seek the approval of your card issuer. At that time, the credit histories of both of you will be reviewed to determine acceptance. Again, this would be typical when you marry or merge your finances with your significant other. The benefit to the new account holder is an automatic credit history based upon your prior card history and usage.
Bear in mind that there are potential downsides for the original card holder. The most obvious one is the possibility of default or poor payment habits by your new joint account holder. This activity will significantly impact your credit score in a negative manner. A second, less obvious, problem can occur if your relationship ends. Once your spouse or partner is on the card, he’s essentially on there for good. If the relationship is over, who’s to say your joint account holder won’t start running up the balance and failing to pay? Even if he maintains the card in good standing, if his other credit activity starts declining, this can impact your joint account – the card issuer may decrease your credit limit or cancel the account altogether. Even if you both agree to close the joint account when the relationship ends to avoid these issues, the loss of this credit line will hurt your credit score, especially if you had a high credit limit – say $20,000 – and low utilization rate.
Despite its popularity among many couples, joint card accounts are to be discouraged. Your credit score is a valuable commodity. In spite of all your best efforts, the actions of another individual can send it crashing down. The smart option is to remain in control of your own credit, on your own.
Please note that there is a difference between a guarantor and a co-signer or joint account holder. A guarantor agrees to take over the card holder’s debt if she fails to pay. With this arrangement, the guarantor usually does not have charging privileges on the account. This is often the case when a parent becomes a guarantor for a child under 21 who has limited or no income, but the parent wants the child to have a card for emergencies and/or to build individual credit. Many card issuers do not offer this option. Some banks prohibit joint accounts and co-signers as well.
After the card holder has established a sufficient credit history and reliable income, you can both request that you be removed from the card account as its guarantor. The card issuer will run a credit check to ascertain if the card holder qualifies to continue with the card account without a guarantor.
See Rules on Reporting Credit Card Household Income on Applications to learn more about how income affects applicants between 18 and 21 and those over 21.
Let’s assume you have either no credit history or some dings on your credit report that have lowered your credit score. If you have a significant other, spouse, other family member or close friend with excellent credit and at least one long term credit card, you may be able to increase your credit score by becoming an authorized user on their card account. You actually get to “piggyback” on the credit of this primary account holder. In this way the good credit history for the primary card holder’s account is added to the credit history of the authorized user. Once this information is added to the AU’s credit report, it has the desired effect of building credit or increasing the AU’s credit score.
To understand how this works, let’s explain a bit about credit scores.
Fair Isaac & Co. (FICO) analyzes the credit history of consumers to determine credit scores identifying what type of “risk” they would be to lenders. Your credit worthiness is tied to your FICO credit scores, ranging between 300 and 850. The company looks at a wide range of criteria to compute your FICO scores for mortgage lenders, automobile financing companies and consumer credit card issuers:
This information is obtained from the three major credit reporting bureaus – Experian, Trans Union and Equifax.
Originally, FICO used authorized user accounts when calculating your credit score. The account histories of these credit cards were reported on the credit reports of both the primary card holder and the AU, and FICO made no distinction between whether you were the authorized user or the primary owner on the reports. But with the increased popularity of “credit card piggybacking” and the outraged outcry from the lending community, FICO decided to make some drastic changes. With the introduction of FICO 08, the company announced they were going to stop including authorized user accounts altogether.
However, this too caused an uproar. This time from legitimate authorized users, like children, partners, spouses and other authentic individuals who stood to lose out with their credit scoring due to the removal of their authorized user status from their credit history. For many this would send their credit score plummeting or even eliminate it completely.
In response, FICO compromised and devised a computation method that uses authorized user accounts in its scoring analysis, but devised in such a manner that helps control credit score tampering. The company is very hush-hush about this exact formulation. However, reports show that this practice still helps the credit scores of most legitimate authorized users.
When you become an authorized user on your spouse’s account, it’s added to your credit card report. If you are added to the account of someone else, like a parent or significant other, this credit card account may or may not be added to your credit reports*.
When the card issuer does report authorized users, it typically reports the card usage, past payments and all aspects of the card history by the primary account holder on your credit report as though this history is part of your credit history. Your score is recalculated to reflect this “new” credit history and activity. This is how your credit score gets boosted.
Bear in mind, only the information about the card account that you are now on as an authorized user is reported on your credit history. No other credit information or history of the primary cardholder is added to yours. Likewise, none of your credit history is added to your primary cardholder’s credit report. Only the activity reflected on the card you have been added to will be added to both your credit reports – good and/or bad.
*The Equal Credit Opportunity Act of 1974 requires card issuers to report a spouse’s authorized user information. For other authorized users, reporting is at the discretion of the issuer. If you aren’t the primary account holder’s spouse, he should contact his card issuer before adding you to learn whether they will report your information as an authorized user to the credit agencies. See Credit Score Boosting Tips for helpful information on ensuring this information will be added to your credit report as an authorized user.
Though not the only game in town FICO has such a dominance in the market, at this point, it may as well be. Its only competitor at this time is VantageScore. This credit scoring model is a venture created in 2006 by the three main credit reporting agencies. It too uses a scale ranging from 300 to 850. VantageScore doesn’t use authorized user accounts in its credit scoring calculations and never has. Because creditors and lenders still don’t rely on a VantageScore when issuing credit, how AU accounts are dealt with here is inconsequential. We only mention it in case you have heard of VantageScore and wonder about its impact – NONE.
Clearly, there are two viewpoints on this topic: the card holder contemplating adding an authorized user and the individual seeking authorized user status. Essentially, you could divide these points as the Pros and the Cons. But in all honesty, there are good and bad effects for both the primary and the AU, as you can see here:
When adding your spouse, partner, family member or friend as an authorized user to credit card accounts, there are some tips to help ensure your AU is maximizing the opportunity to increase his/her credit score.
When discussing the practice of adding an authorized user to a credit card to increase credit scores and help build credit, the discussion wouldn’t be complete without a description of the more aggressive, piggybacking practice.
Piggybacking credit uses the process of adding someone as an authorized user on the credit card account of a primary cardholder with excellent credit for the sole reason of building credit or increasing the AU’s credit score. Another distinction is that the authorized user and the primary cardholder frequently don’t even know each other, let alone have a personal relationship.The entire “transaction” is one of profit.
Prior to 2007, this practice became a popular scheme for credit repair companies. They capitalized on the loopholes available at the time to artificially boost the credit scores of consumers with bad credit. They charged these consumers fees to add them as authorized users to the credit cards of strangers who were purported to have excellent credit scores and a great credit history on the cards to which they were added. Once their credit scores were falsely elevated, these individuals were then able to apply for and qualify for loans and credit, with interest rates they previously would have been ineligible for.
The consumer AUs never actually received or used the credit cards for the accounts they were added to. Cards for authorized users are sent to the address of the primary card holders and AU’s don’t have privileges on the accounts to change the shipping addresses.But access to the card account was never the motive anyway. “Fixing” their credit through this temporary arrangement was the only motivation.
After the housing crisis, lenders expressed outrage at the practice, complaining that many of their loans were the result of these fraudulently inflated credit scores. In response to the ensuing uproar, Fair Isaacs & Co. proposed a change to the way FICO scores dealt with authorized user accounts. They initially proposed a change through FICO 08 wherein no authorized user accounts would be included on credit reports and the resulting credit scores.
However, the Equal Credit Opportunity Act requires lenders to consider all accounts that spouses are permitted to use together when determining the credit worthiness of an applicant. Additionally, the card issuers don’t actually frown on legitimate authorized user accounts – where the primary cardholder has a personal relationship with the AU, nor did they wish to penalize these individuals by removing years of good credit history with the removal of their AU accounts from their credit reports.
So Fair Isaacs went back to the drawing board and came up with a mostly secret algorithm devised to identify and reject fraudulent, for-profit AU accounts, while allowing legitimate AU accounts to remain on the user’s credit report, which is essentially where we still stand today.
Many consumers wonder whether becoming a piggybacking credit card authorized user will still work to fix credit, and if piggybacking to improve a credit score is even still legal. Certainly, piggybacking credit repair has fallen out of vogue and it has become far more difficult for piggybacking credit card companies and consumers to use this tactic as they used to. However, where there’s a will, there’s a way. In many instances, a consumer with bad credit probably has a girlfriend or boyfriend, or at least one personal friend who would be willing to help by allowing his friend to piggyback on his credit card account as an authorized user, thereby helping improve his friend’s credit.
There are still companies offering piggybacking to raise your credit scores and many consumers are still actively piggybacking for better credit. Though results are usually disappointing and short-lived at best. The practice itself is borderline illegal. The clearest evidence of this gray area is the following statute from the Credit Repair Organization Act:
No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.
So a credit repair company charging a consumer to add him to someone’s card account as an authorized user in order to “repair” his credit would be in violation of this statute.
Mortgage lenders have also strenuously expressed the belief that piggybacking to increase credit scores is a form of fraud, which is defined as follows:
To obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of a financial institutions by means of a false of fraudulent pretenses, representations, or promises; shall be fined not more than $1,000,000 or imprisoned not more than 30 years or both.
Though obviously not clear cut, there’s enough evidence to suggest that piggybacking to falsely hike up your credit score through a for-profit credit repair company isn’t a practice totally above board. Moreover, with the changes FICO 08 has made in respect to “non-legitimate” authorized user accounts, it hardly seems worth the effort to even risk it.
Adding an Authorized User for Credit Building FAQ
The following information is not provided by the banks and card issuers, but through personal user reports.
An authorized user has the ability to charge on the credit card, but cannot make changes to the account, nor is the AU legally responsible for paying the balance.
The credit score of the AU will most likely be affected if the card issuer reports the card history to the credit reporting agency. When this is the case, the payment history, balance, age and all other information regarding the card are added to the AU’s credit history as if were his/her own. It does not impact the primary cardholder’s credit score.
When the current credit card account and its history reflects good to excellent credit habits and activity, being added as an authorized user can help build the AU’s credit.
Chase does not collect the SSN of the AU, nor the AU’s individual address. If the addresses of both the primary card holder and the AU are the same, the card history of the primary will be reported on the AU’s credit report. When this is the case, Chase does back date the “new” card to the original date the primary cardholder opened the account.
Despite an elevated credit score, Chase will usually decline an applicant if his credit history doesn’t reveal other cards of his/her own. One tip to help overcome this hurdle is an established relationship with Chase, such as a savings and checking account.
AmEx collects the SSN of the AU, but doesn’t collect the AU’s individual address, nor does this card issuer back date.
AmEx will approve newbies with no more than an AU account on their credit report, but only for their lower end cards. Additionally, the AU account must have a good history and a low utilization rate.
Discover collects the AU’s SSN, but not his/her individual address. Discover back dates the history of the “new” card on the AU’s credit report.
Discover usually allows AUs with no cards of their own to easily qualify for their low end cards.
Capital One is a yes all across the board: the issuer collects the SSN and the address of the AU and back dates.
It’s fairly easy to qualify for a low end Capital One card with a high credit score from an AU account, even when the AU has no individually owned cards.
Reporting an AU’s SSN is optional with Citi, so be sure to request this when you add an AU to your primary card account.Citi does not report the individual address of an AU. Citi also backdates for AU accounts.
It’s difficult to qualify for a Citi Card based solely on an AU account. But if the AU has as least one individually owned credit card as well, this makes a big difference in qualifying for even Citi’s higher end cards. This is the case even if the AU’s individual card is fairly new.
Barclaycard collects the AU’s SSN, but not his/her individual address. Barclaycard back dates AU accounts.
Barclaycard is pretty good about approving AUs just based on their improved score via their AU history. This is the case with even their high end cards, such as the Barclaycard Arrival Plus.
BOA acquires the AU’s SSN, but not his/her individual address. BOA back dates.
When you add an authorized user to your credit card, simply adding this person onto your account in this manner will not affect your credit. The AU’s credit history is not added to your credit history at all. The main way this practice would affect your credit is if your AU ran up a high balance on the card that you were unable to pay. This bad credit activity would then negatively impact your credit worthiness and your utilization rate.
The best way to tackle this problem is before it happens. If you are simply trying to help your AU boost his credit, it’s not necessary to even provide him with a credit card. However, if you want him to have charging privileges, check whether your card issuer allows you to set specific limitations for your AU, and then use these safeguards. This may include setting a smaller credit line for your authorized user. The actual larger card limit is what will be shown on his credit report, so setting a smaller charging limit won’t impact his credit score. Finally, if you do see any problems beginning to crop up, remove your AU from your credit card immediately.
This depends on whether the card issuer reports authorized user accounts to the credit agencies and how.
Though you may add whomever you wish to your credit card account as an authorized user, because of the importance of a good credit history, this decision should be carefully reviewed and well-though out. Make sure you have a closely established relationship with your AU and that you trust the person implicitly.
This is usually fairly easy, requiring no more than a phone call to your card issuer to instruct them to remove your AU. Some card issuers even allow you to take care of this online.
This is kind of a trick question since your AU and his credit history is never actually on your credit report. Your card history may be added to your AU’s credit report as though it were his/her own, but the reverse is not true, nor is any reference made on your credit report that you have an authorized user. Once you remove the AU from your card, no future card activity will be reported to their credit history .
If you become an unauthorized user on someone else’s credit card because they have a good credit history with the card, but then they started paying late, defaulted or maxed out the card, this will mess up your credit score. When this happens, you want to have yourself removed from the card as soon as possible. It’s also a good idea to have the card removed from your credit report. To accomplish this, contact the card issuer and then the credit reporting agencies to explain that you were an authorized user and the you want the card history removed.
Business card issuers do not report business AU accounts to credit agencies. Therefore, this practice will not be helpful or useful for credit building or to increase a credit score.
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Posted on Jan 22, 2015
Excellent article! Very informative, well-written, and interesting. You certainly helped me make sense of how credit scores are computed. Thank you!
Posted on Apr 14, 2015
I’ve been employed in the financial field (mainly in lending, underwriting, and credit reporting) for many years, and this is by far the most thorough and detailed article that I have ever read concerning this topic. Well done.
Posted on May 17, 2015
Can you somehow add an EIN/Business as an AU on a personal account?
Posted on May 29, 2015
Very helpful, best article on this topic.
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Posted on Jul 28, 2015
This is an interesting post and very informative for me.Now I am able to know how can I increase my credit scores.I understood the difference between authorized users and joint accounts and how authorized users increases our credit scores.Thanks for sharing this post.
Posted on Aug 23, 2015
Excellent article! Very helpful !
I’ve a question. How moving my husband who has an authorized card to a joint account will affect my credit? Will it show on my credit history I applied for a new credit card. Or Will I have the date a started the credit I have on hands today? Also, how long does it take to have the new cards?
I am trying to help my husband to built his credit card history. That way he can have a mortgage under name which I cannot due to my visa status.
His credit is 740+ but no credit card history …. He has been an authorized user for the last 5 months.
I guess our situation falls well on “More on Joint Accounts” second topic.