This Article Is About Authorized Credit Card User Benefits In Establishing Credit 

There are many home buyers who are qualified for a home mortgage but do not quite meet the minimum credit score requirements.

• Many have paid all of their bills in time for the past two years but have lower credit scores
• The key to having higher credit scores is by having revolving credit accounts
• However, most unsecured credit card companies will not grant unsecured credit if your credit scores are not at least 700 FICO
• The easiest and fastest way of re-establishing credit and raising credit scores is by getting three secured credit cards with at least $500 credit limits
• A second way is getting added on as an authorized user to a credit card account

Being an authorized credit card user can be a great way to establish or re-establish credit.  However, there are risks and rewards in being an authorized credit card user.  We will be discussing the risks and rewards in being an authorized user on a revolving credit account in the following paragraphs.

Changes With Authorized Card Users

Credit Bureaus are not dumb. They always change their algorithms when it comes to optimizing credit scores of consumers. Recent algorithm changes with authorized card users have been put in place. In order for authorized card users to gain credit score increases, the following conditions need to apply:

• The authorized additional user need to have the same address as the main credit cardholder
• If the additional card user does not have the same address as the main authorized cardholder, the authorized user need to have the same last name as the main user

Being Authorized Credit Card User Can Boost Your Credit Scores

People with no credit or bad credit can boost their credit scores by being an authorized credit card user on somebody else’s credit card.

• Someone with good credit can add you as an authorized user on their credit card account
• One of the rewards of being an authorized user on someone else’s credit card is that the credit reporting agencies will report the main card holder’s credit payments and history to your report
• If the authorized user pays his or her payments on time, it will also reflect it on your credit report and increase your credit scores

This is a great way of establishing or reestablishing your credit.

Instant Credit Tradelines

Risk and rewards in being an authorized credit card user are that you will definitely see instant positive results when you are added as an authorized user with someone who has a stellar credit history.

• The user does not have to give a credit card to the authorized user, thus, eliminating the risk of the cardholder having negative credit because the authorized user does not pay the minimum payment

As an authorized user, you will not get any monthly bills.

• All monthly bills will go to the cardholder including credit cards
• The main cardholder can decide whether to give the authorized user a card to use or can just shred it
• The main cardholder can cut off the authorized user at any time

Negatives Of Being An Authorized Credit Card User

Other risks and rewards in being an authorized credit card user are that there are liabilities.

• If the main cardholder misses a payment or gets into financial trouble, it will affect the authorized user
• I have one mortgage loan client whose credit score is 607 because of the effects of the authorized user card
• The main cardholder has good payment history but has a credit card balance of $3,500 on a $3,000 maximum limit credit card

This is hurting the credit score so I suggested the authorized user have the main cardholder to cut him off.  He did that and his scores improve to over 645 FICO the next credit reporting period.

Fastest Way Of Rebuilding Your Credit

There are many risks and rewards in being an authorized credit card user to establish or reestablish credit.  However, using the authorized credit card strategy in building credit and improving credit scores should be on a temporary basis until the authorized credit card holder has established credit on their own.

For more information about the content in this blog and/or other topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates is a national five-star direct lender with no overlays on government and conventional loans. We are also experts in Non-QM and bank statement loans for self-employed borrowers.

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