Effect on credit score for authorized user

[Anonymous]

Let me start out with the usual new user apology... I'm sorry if this is the wrong forum! i wasn't sure to put this here or in the FICO scoring forum...

Quick back story - my SO is very old school (It took me over a year to be able to move some (not all) of our savings to a high yield account because the SO didn't trust online banks... I swear our money would be under mattresses if I wasn't paying attention!) and is of the belief that their existing one or two credit cards are all that's needed - they are very against opening new accounts, even if they have substantial benefits like SUBs or cash back, because of the (immediate) negative effect on the credit score. 

However, I'm considering opening up another credit card. I know the effect that it is likely to have on my credit - decrease the age of open accounts, increase in the number of hard pulls, increase total borrowing limit, etc. However, it's an account that we are thinking of (at some point) putting my SO on as well. What we can't find is anything that says how that will affect the score of the authorized user when they get added. Obviously, as time goes on, the total credit available is a good thing on their credit report, as is the age of the account. However, do they make a hard pull on their account before adding? Other than the potential HP, are there any other detrimental effects on the score? 

Thanks!

[Revelate]

There's no credit check; impact is basically tacking on the tradeline for the AU's account, and then how that changes their overall profile.  If it's not old enough it might reset AOYA, or it might lower AAOA too; beyond that and revolving utilization calculations if not pretty, AU's are typically beneficial.

If it counts, which under FICO 8 / FICO 9 with the anti-abuse algorithm it may not.

[Fated4Credit]

I just added my sister as an AU yesterday to my cap one card. Will I see her added to the credit bureaus by next statement cut? Also its my oldest card at 23 mos & just to clarify but would adding her negatively affect my AOYA which is 15 mos & AAOA @ 18 mos currently once this reports because I'm planning to app for the Chase Freedom Unlimited in June.

[Anonymous]

No.  Adding her could not affect your credit report -- unless you gave her the AU card and she ran up the balance.

When a new account (an AU account is one example) appears on her report, that can affect her score.  It might help her (assuming that FICO 8 counts it at all, and the balance is zero, and the card has a clean history, and it is much older than her current oldest account).  Or it could hurt her score, depending on how many of those things are not true.

You'll see above that, construed solely as a score-boosting strategy, a lot of things need to be true before the "Adding Jane as an AU to My Card" strategy makes sense.  When all those things are true, however, I think it is a smart choice.

[HeavenOhio]

Welcome, @Anonymous.

I assume that your SO's AoYA (age of youngest account) is greater than a year. If that's the case and FICO counts the AU (chances are it will), her score will drop by about 20 points for resetting her youngest account to zero. Don't let her be surprised by this.

If the idea of point drop really bothers her, you can add her as an AU once the card is a year old. At that point, any ding would be related to AAoA (average age of accounts) and would probably be fairly small.

[Fated4Credit]

@CreditGuyInDixie: My sister has no other accounts, just trying to help get her credit journey started for whenever she decides to apply for her own credit card she'll have a easier time & doesn't have to go the secured route.

Also I'm not so much worried about her running up high utilization, we have an understanding the whatever charges she makes will be her responsibility & if that was ever to become a problem I could just remove her.

[Anonymous]

Hi Fated.  Assuming the card is clean it's fine.  (assuming you can keep the balance low).

If the sole purpose of adding her is to help her credit, then the right step is not to give her the AU card.  And her as an AU but don't give her the card.  Then it's clear that all the charges are yours and also clear who will be paying them (you).

If you are both using the account, in contrast, with her trying to pay her charges and you trying to pay yours, it sets up a stronger likelihood of certain charges not being paid (by accident), missed or late payments, and the general problems associated with family members owing each other money and mixing their finances.

All of that can be avoided and all of what you mention that you want to achieve (getting her a true and good score) can be accomplised by adding her as an AU and then keeping the AU card yourself.

When her AU card appears on her report, and assuming its age is almost 2 years, I encourage you to pull her three FICO scores at creditchecktotal (for $1).  If she gets true FICO scores, it means the FICO 8 algorithm is treating the account as her own.  If CCT says that she is not eligible for scores, it means that the algorithm is ignoring the account.

[Fated4Credit]

Thanks for the tip about checking her scores, thought her info would have showed up on my reports. I thought about keeping the AU card as I'm sort of a control freak when it comes to UTIL, but on the other hand. I want her to have some sort of spending power since she's been using my card for well over a year & has always paid me back for her purchases by the due date. The most she's ever charged was less than $200.

[Anonymous]

I like your general plan.  Here are some tweaks:

Use free tools (Credit Karma, WalletHub, etc.) for pulling frequent reports.  Look to see when the AU account appears on her reports -- and when it does, give extra scrutiny to the Date Opened field.  You want to confirm that this is the same date as appears on your reports (i.e. a date a couple years ago).

Two days after it appears on Karma (etc.) pull all three FICO 8 Classic scores via the $1 trial at Credit Check Total.  If CCT says she has no scores, it means that FICO 8 has flagged that AU account and is going to ignore it.  Hopefully the algorithm will count it.

Once her AU account is 25 months old, she should be ready to apply for the first card in her own name.  Just be sure that the AU account is reporting a small positive balance during the 40 days prior to the application (e.g. $15).  You can check that this is the case with tools like Karma.

You can get lots of advice here about three different cards that would be good for her and are within her reach given her good scores.  Personally I like Discover or the Chase Freedom.

Once she has cards of her own the two of you can transition her away from using the AU card.  She'll have plastic of her own when she wants to buy gas, groceries, etc. and won't need your card.  You can keep the AU account on her reports, of course, for a few more years, as she builds a broader range of credit accounts.

Since she has no loans, she might want to look into the Share Secured Loan Technique.

[Anonymous]

@Jon_in_wherever

Welcome to MyFico!

First, 2 cards is NOT optimal anyway, I don't know where your SO got that from.

First, age of accounts includes both open and closed, and if you've had 2 cards open for a significant length of time, then the small change to your AAoA won't matter much.

Second, HPs only affect your score for 365 days. After that you get the points back, so if you aren't doing a mortgage within a couple years, you shouldn't worry about that either.

Third, increasing borrowing limit (CL) increaseses score potentially via lower utilization.

How does it affect the score of the AU? Well, assuming it's not flagged by the anti-abuse algorithm, it will have the same effect on the AU account.

You did skip the effect a new account has to AoYA. It will cause a ~15 point drop (depending on profile it could be more or less). But these points return for the most part after a year. If this to be avoided for the AU, simply wait until the account is over a year old, as said above.