Disadvantage in adding an Authorized user

[villemiami]

Is there ant Disadvantage in adding an Authorized user?

For example, does it lower the chance of getting approved for a new credit card?

[unsungivy]

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@villemiami wrote:

Is there ant Disadvantage in adding an Authorized user?

For example, does it lower the chance of getting approved for a new credit card?

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It doesn't hurt your chances, unless they abuse your card. Be wary who you give that power to.

[Aim_High]

@unsungivyhas a good point, @villemiami, in that the biggest risk is being careless about who you bestow that card upon.  Because ultimately, YOU are responsible for what they do with the card.  You must be able to trust them fully and have a close relationship.   And just because you trust a family member in general doesn't mean that you can trust them with (YOUR) money and (YOUR) credit.  Some really good and well-meaning people don't know how to manage money.

Some lenders may be reluctant to approve someone as AU who is not a relative.  And others may balk at adding too many authorized users to an account.  

[Slabenstein]

The disadvantage is you're giving someone access to your credit line who has no responsibility to repay it.  A spouse with whom you have combined finances or children whom you want to be able to use your credit line are really the only two cases where I'd add an AU.

[Bockrocker]

The authorized user's name and address becomes associated with your name and your credit profile.  If they default on other, unrelated loans creditors will pull every address then can and you might end up getting mail or actual visits from people demanding payment (not that you have to pay them, but some people don't appreciate such things)

[Anonymous]

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@Aim_High wrote:

@unsungivyhas a good point, @villemiami, in that the biggest risk is being careless about who you bestow that card upon.  Because ultimately, YOU are responsible for what they do with the card.  You must be able to trust them fully and have a close relationship.   And just because you trust a family member in general doesn't mean that you can trust them with (YOUR) money and (YOUR) credit.  Some really good an well-meaning people don't know how to manage money.

Some lenders may be reluctant to approve someone as AU who is not a relative.  And others may balk at adding too many authorized users to an account.  

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Right, and another question is the reason for adding an AU.  While perhaps the most common is to give access to credit, with all the warnings above, another, especially amongst FICO-aware types, is to improve the credit score (usually of the AU, but sometimes of the main cardholder).    This won't work with all lenders, but does for some.   In these type of cases, you don't actually give the card to the AU, so a major part of the risk goes away.   

[Lou-natic]

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@Bockrocker wrote:

The authorized user's name and address becomes associated with your name and your credit profile.  If they default on other, unrelated loans creditors will pull every address then can and you might end up getting mail or actual visits from people demanding payment (not that you have to pay them, but some people don't appreciate such things)

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Yeah this is the worst part about adding an AU that most people gloss over. This happened to me because I was trying to help my sister rebuild her credit, I made her an AU but had the card sent to me so she couldn't run up any debt in my name. As a "just in case" measure becuase people can relapse. The outcome was me getting lots of credit related mail in her name sent to my address. One of the good things about this was she didn't get lured in by a bunch of sub prime lenders but I'm the one that got stuck trashing them all.

My advice is, if you are going to do it make sure it's for someone you love. I doubt I'd ever do it again.

[Zeiram]

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@villemiami wrote:

Is there ant Disadvantage in adding an Authorized user?

For example, does it lower the chance of getting approved for a new credit card?

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Adding someone as an AU can hurt them if you add them to too many of your cards. Some banks have internal algorithms that factor in total number of credit cards, and count authorize user cards and then reject for "too many active credit cards".

If you're adding someone with a thin credit file to 1-2 of your older accounts and they've never had missed payments and you're never using high amounts of the credit line, it's more likely to help them.

[Zeiram]

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@Bockrocker wrote:

The authorized user's name and address becomes associated with your name and your credit profile.  If they default on other, unrelated loans creditors will pull every address then can and you might end up getting mail or actual visits from people demanding payment (not that you have to pay them, but some people don't appreciate such things)

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It never adds my mother's address to my credit file, and AU accounts show up on the other person's credit file, not yours, and it does not say who is the primary account holder, just that Responsibility is "Authorized User".

You're never responsible for actually paying a card you're an authorized user on. The primary account holder is. You'll probably make them really mad if you abuse it, but as far as liability for paying, it's the primary account holder's problem. Legally.

[Zeiram]

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@Anonymous wrote:

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@Aim_High wrote:

@unsungivyhas a good point, @villemiami, in that the biggest risk is being careless about who you bestow that card upon.  Because ultimately, YOU are responsible for what they do with the card.  You must be able to trust them fully and have a close relationship.   And just because you trust a family member in general doesn't mean that you can trust them with (YOUR) money and (YOUR) credit.  Some really good an well-meaning people don't know how to manage money.

Some lenders may be reluctant to approve someone as AU who is not a relative.  And others may balk at adding too many authorized users to an account.  

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Right, and another question is the reason for adding an AU.  While perhaps the most common is to give access to credit, with all the warnings above, another, especially amongst FICO-aware types, is to improve the credit score (usually of the AU, but sometimes of the main cardholder).    This won't work with all lenders, but does for some.   In these type of cases, you don't actually give the card to the AU, so a major part of the risk goes away.   

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Best to just add them, then freeze their card and cut it up when it arrives. Then nothing can use that card number and there is no card.