Editorial Policy

Piggybacking Won't Always Help Your Credit

Eva Norlyk Smith Ph.D.

March 25, 2013

QHi Eva,

Should I get added to a credit card of someone who is bad with money? My dad offered to make me a user on his credit card, and he said that because he's had the card for a long time (more than 15 years), it would help me have good credit. I'm 23 and I've never had a card. But my dad is really bad with bills. He has enough money, but he's disorganized. I always helped him organize his bills when I visited, and I've seen all the overdue ones.

Is there any way I can check on this card to see if he's been paying his bills on time and what the credit associated with the card is? If he's been good with this card (but bad with other bills), how will that affect me?  — Lindsay

ADear Lindsay,

You're smart to be cautious. Getting added as an authorized user to a credit card account with a good payment history can help your credit, but the reverse is also true: Becoming an authorized user on a credit card account with a poor payment history will more than likely hurt your credit.Ask Eva

In theory, if your dad has a good payment history with this particular credit card, you would be OK. Only the credit history associated with the credit card you're an authorized user on will show up on your credit report. So any other credit cards or overdue bills your dad may have wouldn't affect your credit.

That is little comfort, however, because the question is how will you know what the payment history is on the card account? This could be a delicate matter to bring up with your dad. And even if the credit card account currently has a great record of timely bill payments, there's no guarantee it will stay that way. If your father is late on payments on that account in the future, that will affect your credit, and you might not find out until it's too late.

It's hard to tell exactly how bad the situation is without asking your dad to pull his credit reports and show them to you. Unless you have a very honest and open relationship with him, my guess is you don't want to go there — and it's illegal for you to pull his credit reports without his permission. Pulling someone else's credit reports is legal only in very specific circumstances, and none of them reflect yours.

Fortunately, there are ways to build good credit besides becoming an authorized user on someone else's credit card. The fact that you haven't had a credit card before doesn't necessarily mean that you can't apply for a credit card and get accepted. There are credit cards that target people with little or no previous credit history. For example, check out the Capital One Cash Rewards for Newcomers, a credit card specifically designed for people with thin credit files.

If you don't get approved for a regular credit card,, you might have better luck with a secured credit card. Secured credit cards function just like any other credit card, except you put a refundable deposit on file to secure a credit line. In general, the credit line you'll get will be equal to the deposit.

Secured credit cards have gotten a bad rap in the past because they often charged users very high fees. However, in the wake of the Credit CARD Act of 2009, many of these fees have been curtailed. While there are still many bad apples out there, some secured cards are quite reasonable. The Capital One Secured MasterCard, for example, charges a $29 annual fee and has terms comparable to regular bank credit cards.

Because your dad obviously wants to help you build your credit, ask him if he'll help put up a deposit for a secured credit card to get you started with a decent credit line. It's possible to start with a credit line as low as $300 (backed by a $300 deposit). However, with such a low credit limit, it's too easy to max out your credit card, and that can hurt scores, too. To keep you credit scores high, card balances should stay below 30 percent of the credit limit. That means, with a $300 card limit, balances over just $90 could potentially hurt your credit scores.

A credit line of $1,000 to $2,000 will be a better place to start, if you can afford that, and will help you build your credit faster. Just use the card for small purchases and pay off the entire balance each month. Remember, the deposit is fully refundable, and with regular use of the credit card and timely bill payments, you should be able to qualify for a regular bank credit card in as little as 6 to 12 months.

Observing your dad's poor credit habits has alerted you to the pitfalls of casual bill payments. Learning to build credit and manage credit cards can be a fun process, and you'll probably learn even more along the way. Good luck!

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