Point loss from AU?

[Greenmach]

Hi all!

I am trying to understand the best way to AZEO for myself and my SO. We each have a CC and are AU on each other's card. My plan was to have one show a $5 balance and the other $0. However, does a point penalty occur if all your AU show $0?  I'm mostly concerned about our mortgage scores if that helps narrow the question. I at first thought we each needed one more CC but, that hurts your mortgage score the most right?

[AllZero]

Best practice for EX2 is true AZEO. No AU cards reporting a balance. TU4, EQ5 should react similar if it follows the older scoring algorithm.

For your reading pleasure as posted by calyx

Update: FICO2 experiment (is it worth it?)

[AllZero]

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@Greenmach wrote:

I at first thought we each needed one more CC but, that hurts your mortgage score the most right?

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When do you plan to apply for mortgage? Depending on the credit profile, it is recommended that one not incur inquiries or new accounts for 12 months leading up to an application.

Do you know your current EX2, TU4, EQ5 scores?

[Remedios]

EX 8 classic  does have penalty if all AU accounts report $0.00

Not sure about the other two.

There is no penalty for AU reporting $0.00 on older scoring models, in fact, you'd want as many accounts as possible reporting $0.00 balance if those scores are to be used for important lending decisions such as mortgage. 

[Anonymous]

You are also losing points because you each only have one credit card, or two in the eyes of the mortgage scores since you have the authorized user designations on each other’s cards.

True enough adding accounts and hard pulls are not recommended in the run up to a mortgage, how far off do you plan for a mortgage?

[RobertEG]

You should also be aware that, if planning to app for a mortgage in the near future, and use of AU is being used to obtain score improvement for mortgage loan underwriting, a prospective lendor may request that you remove AU accounts as part of their underwriting process.

Thus, any considerations regarding the impact of an AU may become moot.

Whenever and AU account is added to your credit report and is being included in scoring, the resulting score is, by definition, no longer based solely upon your own personal credit history.  Some mortgage lendors routinely want, as part of their underwriting evaluation, so see a credit score that is based only upon the individual consumer's credit history, and will require removal of AU accounts as part of loan processing.

The fact that the other party is a spouse might possibly impact an underwriting requirement to remove AU accounts, as the history of the spouses are closely tied. 

I would advise an initial consultation with a prospective lendor, if you have one in mind, to determine how they will view AU accounts.  That might save you a lot of unnecessary reliance upon AU impact prior to loan application......

[Greenmach]

@AllZero 

I won't find out my new scores until Jan.2 or the 3rd when my Cap1 posts my 1% uti as apposed to the current 55% it's showing now. I've had a stellar month in removing baddies. I have 1 CO and 1 CA left to deal with. CK is already reporting them gone as of today. FAKO jumped 94 points on TU!  649. 
We are also about 6 months out from applying for mortgage. So after reading all this should I and my SO both post a small balance for AZEO? 

[Greenmach]

@RobertEG 

thanks for the advice. I have an ex colleague that works in underwriting. They would have us remove our AU prior. So that kinda solves that. 

[Anonymous]

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@Greenmach wrote:

@AllZero 

I won't find out my new scores until Jan.2 or the 3rd when my Cap1 posts my 1% uti as apposed to the current 55% it's showing now. I've had a stellar month in removing baddies. I have 1 CO and 1 CA left to deal with. CK is already reporting them gone as of today. FAKO jumped 94 points on TU!  649. 
We are also about 6 months out from applying for mortgage. So after reading all this should I and my SO both post a small balance for AZEO? 

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@Greenmach AZEO is done to improve scores, but it is a point in time stategy. There is no benefit to maintaining AZEO unless you are applying for something or trying to see your best scores.

So, its good to practice and be ready and know how and how your scores will react, but it's unnecessary to maintain AZEO from now until then, unless you don't mind the extra work and just want to. As long as you know your scores and can have it implemented on time, you are good.

May may need to do so to watch the changes in your score as you improve it but that's up to you.

@Anonymous found one, first Ive saw.