In the past, many credit repair companies and even individuals have used authorized user accounts as a way to fix credit. If one person who had bad credit became an authorized user on another person’s credit card, the credit card owner’s good credit and payment history could pull up the authorized user’s credit score. At first, this made a bit of sense. It allowed parents to help their children build credit history or their spouses to pull up their credit scores. Eventually, though, credit repair companies started to abuse this fact. They would actually pay people to add complete strangers as authorized users to their accounts. There wasn’t a huge risk for the card owners, since the strangers didn’t actually have plastic cards to swipe or credit card numbers at their fingertips. The card owners simply continued to keep their balances low and make payments on time, and they pulled up the credit scores of total strangers.
Because this is obviously not a good measure for a credit score, which is really a risk score for banks and other lenders to check you out by, the Fair Isaacs formula stopped taking authorized user accounts into the credit score formula. An authorized user is now just someone who gets to use a card, but the good credit history of the real card owner doesn’t transfer over.
What, now, are family members and friends to do about this change? If you want to help your spouse, child, or other close loved one improve his or her credit score, how do you go about it? Well one way to help them fix their credit is to add them as a joint account holder on your credit cards. You can still choose not to actually give them their own credit card, although there’ll still be able to legally use your credit card number.
Joint account ownership makes both parties responsible for the credit card payments, and it can be a good way to improve your own credit. However, you can’t always trust this method with people who have poor credit. If you know someone who has already struggled with overspending on credit cards and has had trouble making payments, be very wary of making them an authorized user. They will be able to run up your credit card debt, and the things they do with the card can actually pull your credit score down.