topic Re: AU complete primer? in Understanding FICO® Scoring

AU complete primer?

Eyepinpools — Thu, 15 Jul 2021 05:16:30 GMT

I did a search but couldn't find a comprehensive rundown of the pros and cons of adding an AU account. Maybe best practices for scoring also. Which banks report, who they benefit, AZEO practices (I've heard AU reporting zero can cause penalty) etc.

I'm so uninformed about AUs I don't even know the appropriate questions to be asking.

Can anyone link me to or put together a thread with any and all information about AU accounts.

Thanks y'all

Re: AU complete primer?

Anonymous — Thu, 15 Jul 2021 13:23:39 GMT

I don't remember seeing one thread that covers all aspects of an AU account, but I will give a summary of the knowledge I have collected and others can chime in and add their knowledge.

AU Reporting

When an AU account reports the authorized user will gain the age and payment history (positive or negative) from that account*. The balance and limit of that card will be added to the balances and limits of the authorized user's profile. There are different reporting timeframes for how soon specific banks will report AU accounts and I am very much uninformed on these timeframes.

*Amex AU accounts report as a new card and the user will not gain any payment history or aging benefits, in fact the AAoA will decrease as the Amex AU will essentially report as a new card.

Benefits and Downsides of AU accounts

AU accounts are most beneficial to young and thin profiles, proving very helpful for those who are starting to build credit and those who are rebuilding. For an AU account to be most beneficial, it should be older than the AAoA of the recipient, have very low utilization, and have positive payment history. Conversely, if an AU account is younger than the AAoA, has high utilization, or has negative payment history then the recipient of the AU account could lose points. It is also worth noting that many lenders will discount AU accounts during underwriting which can minimize the positive effects.

Risks to the Original Account holder

I have seen several people ask what is the risk to me if I add someone to my account. The short answer is there is very minimal risk to the Original Account holder, assuming you do NOT give the authorized user the card that you will receive. If the user is given this card then you are responsible for paying any purchases they make as if they are your own.

AU Accounts and AZEO

Practicing AZEO can be complicated by AU accounts. Depending on which score you are trying to maximize you may or may not want to have a balance report on an AU account. For FICO 5,4,2 AU accounts are counted the same as non AU accounts and to maximize your score you would want only one account reporting a small balance (that account can be an AU account or one of your own accounts). For FICO 8 and newer models there are two separate all zero point losses; an AZ loss for your cards and an AZ loss for AU accounts. If you let both your accounts and the AU accounts report zero balance you will be assessed both point losses. To avoid an AU AZ loss and, in turn, maximize F8+ scores you should let one of your own cards AND one AU card both report a small balance.

Anti-Abuse Algorithm for AU accounts (FICO 8 and newer)

There is an anti-abuse algorithm in place for FICO 8 models and newer. There is very minimal information on how this anti-abuse algorithm works. There have been theories that it is related to the authorized user's last name or address matching with the original account holder. However, we have evidence that you can have a different last name, a different address, or both and still have the AU account provide a score benefit. The only way we have found to test this is to let an AU account report a small balance then to let it report a zero balance, if you encounter the AU AZ point loss then the card is actively contributing to your score, if you see no point change then the card has been discounted by the anti-abuse algorithm.

Re: AU complete primer?

Kforce — Thu, 15 Jul 2021 14:57:51 GMT

Thank you for putting this together.

Nice having the info all in one place

Re: AU complete primer?

Eyepinpools — Thu, 15 Jul 2021 17:15:26 GMT

@Anonymous wrote:
I don't remember seeing one thread that covers all aspects of an AU account, but I will give a summary of the knowledge I have collected and others can chime in and add their knowledge.

AU Reporting
When an AU account reports the authorized user will gain the age and payment history (positive or negative) from that account*. The balance and limit of that card will be added to the balances and limits of the authorized user's profile. There are different reporting timeframes for how soon specific banks will report AU accounts and I am very much uninformed on these timeframes.
*Amex AU accounts report as a new card and the user will not gain any payment history or aging benefits, in fact the AAoA will decrease as the Amex AU will essentially report as a new card.

Benefits and Downsides of AU accounts
AU accounts are most beneficial to young and thin profiles, proving very helpful for those who are starting to build credit and those who are rebuilding. For an AU account to be most beneficial, it should be older than the AAoA of the recipient, have very low utilization, and have positive payment history. Conversely, if an AU account is younger than the AAoA, has high utilization, or has negative payment history then the recipient of the AU account could lose points. It is also worth noting that many lenders will discount AU accounts during underwriting which can minimize the positive effects.

Risks to the Original Account holder
I have seen several people ask what is the risk to me if I add someone to my account. The short answer is there is very minimal risk to the Original Account holder, assuming you do NOT give the authorized user the card that you will receive. If the user is given this card then you are responsible for paying any purchases they make as if they are your own.

AU Accounts and AZEO
Practicing AZEO can be complicated by AU accounts. Depending on which score you are trying to maximize you may or may not want to have a balance report on an AU account. For FICO 5,4,2 AU accounts are counted the same as non AU accounts and to maximize your score you would want only one account reporting a small balance (that account can be an AU account or one of your own accounts). For FICO 8 and newer models there are two separate all zero point losses; an AZ loss for your cards and an AZ loss for AU accounts. If you let both your accounts and the AU accounts report zero balance you will be assessed both point losses. To avoid an AU AZ loss and, in turn, maximize F8+ scores you should let one of your own cards AND one AU card both report a small balance.

Anti-Abuse Algorithm for AU accounts (FICO 8 and newer)
There is an anti-abuse algorithm in place for FICO 8 models and newer. There is very minimal information on how this anti-abuse algorithm works. There have been theories that it is related to the authorized user's last name or address matching with the original account holder. However, we have evidence that you can have a different last name, a different address, or both and still have the AU account provide a score benefit. The only way we have found to test this is to let an AU account report a small balance then to let it report a zero balance, if you encounter the AU AZ point loss then the card is actively contributing to your score, if you see no point change then the card has been discounted by the anti-abuse algorithm.

Fantastic. You are amazing for that write up, thank you!!!

To add info does anyone know which banks definitely report AU accounts with full time of the account and payment history?

I believe I read in another thread BOA, Citi, Cap1 and discover all fully report. Can anyone verify or add to that list?

Also, as far as the AZ penalty in F8 goes, is it potentially more significant than the score boost that a thick profile might gain? For instance, I believe I'm in a thick card with 6 revolvers but four of them were opened in the last 6mo so my AAoA and AoYA have taken a significant hit. I was at TU828 when I only had two revolvers and now im in the 750-770 range.

Re: AU complete primer?

Anonymous — Thu, 15 Jul 2021 17:54:46 GMT

@Eyepinpools wrote:
@Anonymous wrote:
I don't remember seeing one thread that covers all aspects of an AU account, but I will give a summary of the knowledge I have collected and others can chime in and add their knowledge.

AU Reporting
When an AU account reports the authorized user will gain the age and payment history (positive or negative) from that account*. The balance and limit of that card will be added to the balances and limits of the authorized user's profile. There are different reporting timeframes for how soon specific banks will report AU accounts and I am very much uninformed on these timeframes.
*Amex AU accounts report as a new card and the user will not gain any payment history or aging benefits, in fact the AAoA will decrease as the Amex AU will essentially report as a new card.

Benefits and Downsides of AU accounts
AU accounts are most beneficial to young and thin profiles, proving very helpful for those who are starting to build credit and those who are rebuilding. For an AU account to be most beneficial, it should be older than the AAoA of the recipient, have very low utilization, and have positive payment history. Conversely, if an AU account is younger than the AAoA, has high utilization, or has negative payment history then the recipient of the AU account could lose points. It is also worth noting that many lenders will discount AU accounts during underwriting which can minimize the positive effects.

Risks to the Original Account holder
I have seen several people ask what is the risk to me if I add someone to my account. The short answer is there is very minimal risk to the Original Account holder, assuming you do NOT give the authorized user the card that you will receive. If the user is given this card then you are responsible for paying any purchases they make as if they are your own.

AU Accounts and AZEO
Practicing AZEO can be complicated by AU accounts. Depending on which score you are trying to maximize you may or may not want to have a balance report on an AU account. For FICO 5,4,2 AU accounts are counted the same as non AU accounts and to maximize your score you would want only one account reporting a small balance (that account can be an AU account or one of your own accounts). For FICO 8 and newer models there are two separate all zero point losses; an AZ loss for your cards and an AZ loss for AU accounts. If you let both your accounts and the AU accounts report zero balance you will be assessed both point losses. To avoid an AU AZ loss and, in turn, maximize F8+ scores you should let one of your own cards AND one AU card both report a small balance.

Anti-Abuse Algorithm for AU accounts (FICO 8 and newer)
There is an anti-abuse algorithm in place for FICO 8 models and newer. There is very minimal information on how this anti-abuse algorithm works. There have been theories that it is related to the authorized user's last name or address matching with the original account holder. However, we have evidence that you can have a different last name, a different address, or both and still have the AU account provide a score benefit. The only way we have found to test this is to let an AU account report a small balance then to let it report a zero balance, if you encounter the AU AZ point loss then the card is actively contributing to your score, if you see no point change then the card has been discounted by the anti-abuse algorithm.
Fantastic. You are amazing for that write up, thank you!!!

To add info does anyone know which banks definitely report AU accounts with full time of the account and payment history?

I believe I read in another thread BOA, Citi, Cap1 and discover all fully report. Can anyone verify or add to that list?

Also, as far as the AZ penalty in F8 goes, is it potentially more significant than the score boost that a thick profile might gain? For instance, I believe I'm in a thick card with 6 revolvers but four of them were opened in the last 6mo so my AAoA and AoYA have taken a significant hit. I was at TU828 when I only had two revolvers and now im in the 750-770 range.

I believe more often than not banks report the full history, I think it is going to be easier to note exceptions.

I can confirm Citi and Cap1 give full history.

The penalty is pretty profile dependent from my understanding. I lose 6 points on F8 if the card I am an AU on reports at zero, I have a thick file with 16 open revolving accounts (1 is AU account). I have seen reports of others losing 12 points with AU AZ, hopefully others can chime in and provide more insight and maybe we can figure out a commonality in the score changes. If the AU card is significantly older than your oldest account, I think the benefits of aging will outweigh any AU AZ penalty but that is purely a guess.

I am planning to remove myself as an AU next month and will be curious to see what removing myself as an AU does to my scores, I am thinking it will be minimal changes if any at all.

Re: AU complete primer?

Eyepinpools — Thu, 15 Jul 2021 18:05:17 GMT

Please report back what you find after removing yourself as an AU. Thank you again for all the knowledge you have contributed thus far.

Re: AU complete primer?

GrandBay — Mon, 19 Jul 2021 01:36:20 GMT

@Anonymous I am considering removing myself as an AU on my wife's Citi card

please report back with DPs

it will help guide my decision.

Re: AU complete primer?

Anonymous — Mon, 19 Jul 2021 13:19:56 GMT

@GrandBay wrote:
@Anonymous I am considering removing myself as an AU on my wife's Citi card
please report back with DPs
it will help guide my decision.

I will certainly report back with my results. Depending on how quickly the AU account reports as terminated I may have conflating data, so it could be difficult to determine what point changes came from the AU removal and what changes were from balance changes. Reporting date for my AU card is around the 16th of the month, so if it doesn't update as terminated until the next report date I won't have any info until mid August.

Re: AU complete primer?

Anonymous — Mon, 09 Aug 2021 16:30:21 GMT

@Anonymous wrote:
@GrandBay wrote:
@Anonymous I am considering removing myself as an AU on my wife's Citi card
please report back with DPs
it will help guide my decision.
I will certainly report back with my results. Depending on how quickly the AU account reports as terminated I may have conflating data, so it could be difficult to determine what point changes came from the AU removal and what changes were from balance changes. Reporting date for my AU card is around the 16th of the month, so if it doesn't update as terminated until the next report date I won't have any info until mid August.

Requested to be removed as an AU today. Also removed my wife from a Discover card that she was an AU on. I should hopefully have DPs for both removals in the next week or less.

This will eliminate my only AU card and my utilization should stay almost identical. This card is only slightly older than my AAoA so there should be minimal impact to aging metrics as well.

For my wife's profile, the Discover card is high utilization and is not her only AU. It is, however, her oldest card, will be interesting to see how this affects her scores.

Re: AU complete primer?

Anonymous — Tue, 10 Aug 2021 12:26:55 GMT

The Discover card that my wife was on reported as terminated today. I was happy to see that the card is still on her report, just as a closed account. So she has retained all of the aging benefits from the card. I have seen conflicting reports on whether or not aging is retained when an AU is terminated, in this case it appears that it was. With the high utilization account removed from her profile she saw her FICO8 increase by 12 points and her FICO2 increased by 20 points. I can also report that one of my Synchrony cards that she was an AU on still shows on her report even though Synchrony closed that card at some point last year.

It appears that Discover and Synchrony AU accounts will show as closed accounts when the AU is removed. Once the Citi card I was an AU on reports I will have a DP for Citi as well.

Re: AU complete primer?

Anonymous — Wed, 18 Aug 2021 12:57:43 GMT

Well... Some interesting and unexpected results from removing myself as an AU.

First, I have done some more research and looking at experiences from others, as well as what I have experienced, AU accounts are not removed from your credit profile when you are removed from them. They report as terminated. So you will retain all of the aging and history provided by the card. If that card has late payments on it and that is why you removed yourself you will need to contact the issuer and request they remove the card from your reports entirely. If that fails, you will need to dispute with the bureaus.

Now the intersting stuff. My aging metrics stayed the same. My balance decreased by 71 dollars and my utilization only went from 27% to 29%. I did lose $8,100 of credit limit, but I have a $3,000 CLI that is yet to report that will help restore some of that lost limit. What is surprising is my score dropped by 20 points. 741 to 721 on EX8.

The only change was the AU reporting as terminated, so I know that is where the point change came from. It is just a matter of figuring out what factor was affected to cause the score change. My guess is it has something to do with the number of open tradelines/open revolving accounts. My utilization has increased to 29% from 24% before and I saw no score change. To my knowledge, credit limit and available credit are not scoreable factors so I would be surprised if either of those were the culprit. If any of the gurus here have some ideas on what may have caused the score change I am certainly open to sharing additional data points.

On EX2 I actually gained 11 points. This was from having 1 less account with a balance report. From tracking my scores I knew that I was on the cusp of an AWB threshold for EX2 and that one additional card with a balance should push me over and I expected the 11 point increase, as that is what I had previously seen.

Re: AU complete primer?

Eyepinpools — Wed, 18 Aug 2021 15:06:04 GMT

Thank you AJ!!

Re: AU complete primer?

Anonymous — Tue, 25 Jan 2022 20:49:00 GMT

I saw some kudoes come across for posts I had made here. It has been a while since I have visited the forums, life and what not keeping me busy, but decided to drop in and update some of my findings. The AU that was terminated was recently removed from my credit report entirely, I didn't raise a dispute so I do not know if this is something initiated by the issuer (Citi in this case) or something the bureaus are doing to prevent terminated AU accounts from providing aging boosts.

Just wanted to update everyone and say that the effects of an AU remaining after termination are not guaranteed.

Also, some additional testing indicates that you may see some significant boosts to your score if you add a low utilization AU account when you have moderate or high utilization. Adding and removing low utilization AU cards (<10%) when I have been around 25%-29% utilization has resulted in score increases and decreases between 15 and 20 points, consistently.