topic Re: How Do Authorized User Accounts Affect FICO scores? in Understanding FICO® Scoring

How Do Authorized User Accounts Affect FICO scores?

Anonymous — Fri, 22 May 2020 18:16:42 GMT

How do authorized user accounts impact one's credit score? If I have two cards, a 5 year old card for which I am responsible with an 80% utilization and no late payments, and the other a 3.5 year old card with 25% utilization also with no late payments on which I am an authorized user.

Is the authorized user card helping me (utilization), hurting me (age of accounts) or having no impact?

Re: How Do Authorized User Accounts Affect FICO scores?

RSX — Fri, 22 May 2020 18:19:24 GMT

right now it is helping you

it is lowering your overall Util

Re: How Do Authorized User Accounts Affect FICO scores?

RSX — Fri, 22 May 2020 19:20:21 GMT

not having any further info, i would suggest you

pay down your own card to below 9% - wait for it to report to all CR's

then apply for another card

after this you will be able to remove yourself from the AU and go it on your own

Re: How Do Authorized User Accounts Affect FICO scores?

AzCreditGuy — Fri, 22 May 2020 20:25:44 GMT

In my case a 19 to 25 pt difference to my Fico score, Transunion doesnt report my 2 AU accounts I am on.

Re: How Do Authorized User Accounts Affect FICO scores?

Anonymous — Fri, 22 May 2020 23:04:21 GMT

Being an authorized user will harm you, if the specific account carries a high balance from the original debtor.
If your an authorized user, it should be on an account that is paid off frequently, or has a very low balance compared to available credit.
Being an authorized user only helps if there's an extensive credit line, with small balance.

Let's say if an account holder has a credit line of $500.00, but uses more than $120.00 of the total amount it will hurt your score. Yet if they stay below that threshold of not more than 30%, then it can help you.
Ideally, it's best to be an authorized user on accounts that have a much higher credit line, and low balances. But used often.

Re: How Do Authorized User Accounts Affect FICO scores?

CreditBob — Fri, 22 May 2020 23:06:51 GMT

I listened to the VP over FICO scoring in regards to authorized user accounts. These type of trade lines only are beneficial to the score under these two situations. One, it has to be parent to immediate children. Second, is spouse to spouse. If an AU comes from a friend, other family member, or has been purchased from a company, the algorithm in the new scoring models, 8-9-10, then it will not work.

The second half of the issue are the lenders. They want to see you be fully responsible for your own credit history by means of secured or unsecured cards in your name, or you have a cosigned account. Authorized user accounts cause the lender, such as a bank or credit union, not be able to accurately measure your credit worthiness or risk.

For rebuilding your credit here is the best advice. Have all your accounts in your name were you are responsible for the bill each month. On your own card, keep the utilization under 5%. Even a one dollar balance that does not set off any utilization percentage. Bottom line is the balance. Go to Credit Strong or Self aka Self Lender who reports a savings account as an installment trade line to all three bureaus.

Re: How Do Authorized User Accounts Affect FICO scores?

Anonymous — Wed, 27 May 2020 13:53:49 GMT

Welcome @Anonymous As stated above, sometimes AU accounts are flagged by an anti-abuse algorithm in FICO versions 8 and forward. No one outside of FICO really knows exactly how it works, but it was definitely their intention to flag non-family. Unfortunately, the algorithm doesn't have that info, so our best guesses are that if name or address are different, it might throw the flag.

Anyway, first, the AU account will ALWAYS count on the mortgage scores, so there is that. It counts on versions 5, 4, and 2 and variants. In order to see whether its counting on version 8+, allow the AU account to report a $0 balance. If you lose 10-15 points, it's counting. (If all primary or counting AU accounts report zero, there is a AZ penalty.) So you always want a small balance on 1 primary card and 1 AU card for best scores.

Now, score is determined in great part by the percentage of utilization of your TCL that you are using. Therefore, the extra CL is helping you where it's counting, especially since your utilization is so high on your primary card.

It is slightly reducing your AAOA, on the versions where it is counting, but since these are your only 2 cards, I'm assuming, you're getting points just for having a 2nd card, so I believe the benefit outweighs the tiny detriment.

And additionally you are under penalty until you have at least 3 revolvers. So this AU is adding to TCL, adding good payment history, and reducing penalty for too few cards.

The only reason to dump it would be if it ever had a delinquency or high utilization, IMHO.

Please read the following to give you an overview of how things work:

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/General-Scoring-Primer-and-Version-8-Master-Thread-rev-5-17-20/m-p/6023348/highlight/true#M169679

P.S. When you apply and the computer makes the decision, it's gravy. On manual review, like for mortgages, some lenders will give AU accounts less weight and know it helped your score, but they can't exclude it from scoring, lol.

Re: How Do Authorized User Accounts Affect FICO scores?

Remedios — Wed, 27 May 2020 01:26:42 GMT

Because AU accounts "count" on older scoring models, most lenders will ask you get yourself removed during the mortgage process, because they want to see your score and how you manage your credit, not how someone else manages theirs.

For CC lending, most major lenders will "strip" AU accounts. That's why you will not get approved by Chase if you have a 30 year old AU card, and one that's 6 months old in your name.

The purpose of AU accounts under normal circumstances is to allow members of the same household to continue sharing finances if that's what they chose to do.

For scoring purposes, its good for artificial AAoA inflation, but again, in order to properly asses the risk applicant presents, the algorithm will often ignore it.

Utilization wise, they can help, but that's only when you're looking at your own score. When lender looks at it, they can tell what's what.

They are nothing but a crutch unless again we're talking about members of the same household. At some point, you need to build your own credit, and sooner you start, better it will be for you.

Re: How Do Authorized User Accounts Affect FICO scores?

TMB_ — Thu, 28 May 2020 06:15:28 GMT

Something interesting to add. Both me and my wife x-authorized ourselves on two cards (one per person). Both of us stay at ~1% of the total utilization and typically both of us have two cards with balance (balance per card ~1%). This is what we observed: - When an owner of a card pays his/her card to 0 than the FICO8 (TU, EX) of the authorized user goes down by ~15points. - At the same the owner's score stays flat. The EQ seems to be robust for this (no changes). We repeated this few times...so it in not a one time event.

Re: How Do Authorized User Accounts Affect FICO scores?

Anonymous — Thu, 28 May 2020 19:15:00 GMT

That is the AU AZ penalty.

Re: How Do Authorized User Accounts Affect FICO scores?

TMB_ — Sun, 31 May 2020 22:58:30 GMT

Thanks for pointing this out.

Re: How Do Authorized User Accounts Affect FICO scores?

Anonymous — Mon, 01 Jun 2020 22:39:52 GMT

@TMB_ My pleasure. You may wish to read the scoring primer linked below. When I get the time I'm going to expand the section explaining this penalty.

You can always check at the bottom for the last date revised for each post. As we learn more I continue to update it.

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/General-Scoring-Primer-and-Version-8-Master-Thread-rev-5-17-20/td-p/6023348

Re: How Do Authorized User Accounts Affect FICO scores?

Wavester64 — Tue, 09 Jun 2020 18:34:03 GMT

@Remedios wrote:
Because AU accounts "count" on older scoring models, most lenders will ask you get yourself removed during the mortgage process, because they want to see your score and how you manage your credit, not how someone else manages theirs.

For CC lending, most major lenders will "strip" AU accounts. That's why you will not get approved by Chase if you have a 30 year old AU card, and one that's 6 months old in your name.

The purpose of AU accounts under normal circumstances is to allow members of the same household to continue sharing finances if that's what they chose to do.
For scoring purposes, its good for artificial AAoA inflation, but again, in order to properly asses the risk applicant presents, the algorithm will often ignore it.
Utilization wise, they can help, but that's only when you're looking at your own score. When lender looks at it, they can tell what's what.

They are nothing but a crutch unless again we're talking about members of the same household. At some point, you need to build your own credit, and sooner you start, better it will be for you.

Question for you @Remedios : Most of the time a person wants to be an AU on another's account (say P2) because their credit is not strong say. And thus if the primary user's credit is good, and maintains a certain card diligently, it has a positive affect for the AU. Now say for instance something different. I'll never be able to get a CHASE card because of the 5/24 rule, but my P2 can and I have them get the card and put me as an AU and I maintain the card 100% (diligently) but say my P2's maintenance of her other cards starts being poor, does that affect my credit at all since the card we share is in perfect standing? I am thinking it *shouldn't* have any negative affect, but then again...

Re: How Do Authorized User Accounts Affect FICO scores?

Remedios — Tue, 09 Jun 2020 18:37:24 GMT

Anything that happens with AU card will affect you the same. If utilization goes up, you will end up with scoring penalty, negatives, same.

The "AU doesn't really count that much" is only applicable for application purposes.

Re: How Do Authorized User Accounts Affect FICO scores?

Wavester64 — Tue, 09 Jun 2020 19:21:51 GMT

@Remedios wrote:
Anything that happens with AU card will affect you the same. If utilization goes up, you will end up with scoring penalty, negatives, same.

The "AU doesn't really count that much" is only applicable for application purposes.

But if I manage the 1-card that I am an AU on, but I manage it as the primary and its PIF each month, it shouldn't matter if the P2's other cards tank say - it shouldn't affect me since I am on AU on the one card that is PIF each month, right?

Re: How Do Authorized User Accounts Affect FICO scores?

Remedios — Tue, 09 Jun 2020 22:51:54 GMT

Only cards on which you're authorized user have effect on your CR.

Cards that arent "shared" have no influence on your report because they arent on it.

Re: How Do Authorized User Accounts Affect FICO scores?

Anonymous — Mon, 15 Jun 2020 18:45:41 GMT

Im an AU on 2 cards (one of them for over 15 years) and neither impact my UTI or total card balances. I wonder why?

Re: How Do Authorized User Accounts Affect FICO scores?

Anonymous — Mon, 15 Jun 2020 19:56:01 GMT

@Anonymous How do you know this? Are you relying on a CMS? If so, you cannot conclude that from CMS frontends.

Re: How Do Authorized User Accounts Affect FICO scores?

Anonymous — Mon, 15 Jun 2020 20:17:24 GMT

@Anonymous I'm looking at the monthly FICO reports is all. So those balances or available credit on AU accounts wouldn't show up there, but would show elsewhere? They aren't factoring into balances or UTI on anything I have access to.

Re: How Do Authorized User Accounts Affect FICO scores?

Anonymous — Mon, 15 Jun 2020 20:22:06 GMT

Most CMS front ends do not include AU statistics. Experian actually has two places that show utilization one with and one without.

This is no indication whatsoever as to what the algorithm is actually doing that created your score.

If you’d like to know whether or not your AU cards are counting, there’s an easy test to perform. Have all your AU cards report zero balances while maintaining at least one balance on a non-AU card.

If you see a significant score drop, 10 to 15 points, they are counting on version 8 and forward. No matter what, they’re counting on fico versions prior to 8.

For more basic information read the following:

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/General-Scoring-Primer-and-Version-8-Master-Thread-rev-5-17-20/m-p/6023348#M169679