1 great hack for improving credit

Adding an authorized user is a GREAT hack to improve your credit score. It can increase your chances to get higher “funding,” qualifying for a house, an auto loan or whatever your credit goal is.

So, what exactly is an “Authorized User?”

An Authorized Users is someone who holds a credit line but is not the actual primary account holder.

Here’s an example:

Say you are married and you own a credit card with a $10,000 limit with a $500 balance. You add your wife with no credit history as an “Authorized User” with your credit card company so she can use your credit card etc. Now your past credit card history will show up on her credit as well just as it is on yours.

How can the authorized user improve my credit?

Well, in the above example, the wife didn’t have much credit at all but her goal is to try to qualify for loans or credit cards in the future on her own. Since she has no credit, adding the authorized user will actually benefit the wife. The $10,000 limit will actually show up on her credit report now. This process is also called “piggybacking.”

There is a misconception that adding authorized users to one’s file will automatically make the credit sky rocket with super powers and now you qualify for $150,000 in loans etc.

Don’t get me wrong, they do help or give a credit boost but you have to be somewhat realistic, they’re not magic! Of course, banks can tell if an account is an authorized user or if it is actually your account (primary account) so keep that in mind.

BUT it does increase your credit score and improve history in the above example because she didn’t have much credit history. Since the husband only owes $500, this low balance is a great low utilization. Banks will now see her credit report which will show the $10,000 credit card and be more prone to extending her credit now or approving her loan.

On the contrary, if the husband owed $10,000, than the credit card would be considered maxed out. If her goal was to try to get “funding,” even though the husband has not missed one payment, it would actually hurt her credit since the balance or utilization is so high.   Banks see this as being “maxed out” so they most likely would not like to extend her credit or approve her for a loan.

Revolving and installment accounts are 30% of your credit score so depending on how many accounts you have, an authorized user can greatly improve your credit and increase your score.

Some important things to know before adding authorized users to your account.

  • Be sure you know what the balance is or make sure that its under 30% of the credit card limit. No use in adding an authorized user to your file if its over 50% or maxed out.
  • Before adding Citi, Capital One, Discover authorized users please note these credit card companies now require that you send in ID and SSN copies sent in. So if you have a CPN file, they won’t be added.
  • This sounds sort of obvious but you’ll be surprised, ask the account holder if there are any late payments on their card before you add because if you’re not careful and do add an Authorized User to your account with a late payment, now it’s your late payment too!

If you are adding an Authorized User  to get higher funding, add 1 to 2 AUs (authorized users) that are at least 2 years old and minimum of $8000 credit limit. Anything less would make that much of a impact. The bigger the limit, the better!

-Victor Fernandez