Editorial Policy

At 21, graduate from being an authorized user

Erica Sandberg

March 15, 2016

Q Hi Erica,

I have been an authorized user on my sister’s credit card for two years — ever since I turned 19. She keeps her card clean, and my Experian report shows all perfect payments and never a balance. When I use the card (which is almost never), I always give her the money and she pays. I checked my Experian FICO score though, and it is only 602. I thought it would be much, much higher!! What is wrong? My sister’s FICO is 800! — Monica

A Dear Monica,

I can see why you’re confused! The credit card that your sister is letting you use is appearing on both of your credit reports, so it would seem logical that your scores should be similar. But no, and I’ll tell you why — as well as how to really kick those numbers up.

First, I’m glad you checked your consumer credit report, because I would have suggested that you do that. Not all credit issuers send account activity to authorized users’ credit files. It’s great news that the credit card is being listed in your credit report.

Your credit report, though, is also indicating that the card is not owned by you. As an authorized user, you’re merely a guest on the account, which means you are not responsible for paying any bills associated with it. Credit scores, such as the FICO and the VantageScore, include the financial data from these credit reports in their mathematical formulas, but all that information is weighed differently. Some factors, such as payment history and the amount of debt you’re currently holding in relation to the amount you can contractually borrow, carry more weight, while other activity has less impact, such as the number of credit applications you make and the types of credit products you have. An authorized user account is factored in, but it’s not as significant as if you were the owner.

Another reason your scores may not be as high as your sister’s is that she probably has other positive information on her reports. For example, she may be paying a mortgage and a student loan, so her reports are indicating a steadily declining balance. This is her credit mix. Or she may have several other credit cards that she pays off and on time every month. Such actions would certainly result in an exceptional credit rating.

It’s true that your credit scores now aren’t terrific. FICOs (as well as the newer version of the VantageScore) range from 300 to 850, and the low 600s is considered poor. That’s not a judgment on you. It is just ranking your level of lending risk based on what is appearing on your credit reports. If all that is showing up is this one account that isn’t even yours, there is simply not enough data to accurately assess your creditworthiness.

So now it is up to you to add more to your credit reports. Now that you’re 21, you can get a card of your own. Presuming you have a steady source of income, there is nothing holding you back from getting a card of your own.

The easiest card for you to get is a secured card, which means you will need to put down some cash as collateral. You’ll get it back when you close the account with no balance remaining. Some issuers also offer unsecured cards to people with your credit rating, but the options are more limited. In either case, you’ll probably be looking at annual fees just to have the account. Interest rates tend to be prohibitive, too, but that’s OK. Pay your entire bill within the interest-free grace period, and you won’t pay a penny in extra financing fees.

Your credit scores will start to play catch-up with your sister’s as long as you get your own card, use it often, and always pay on time and in full. Keep it up for at least a year, then check your credit reports again. I promise your scores will be higher than they are today. When your scores get up there — say, 700 or so — remove yourself from your sister’s account. You won’t need to be on her card anymore. Your scores may drop a little with your sister’s card no longer showing on your credit report, but it’s more important that you become independent. As long as you continue to manage your cards well, your credit scores will rise.

Got a question for Erica? Send her an email.

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