Purchasing a home soon, is this authorized user card I have hurting or helping me?

[majesticsky]

Hello,

I am sure this has been asked before, but I am not sure if its good or bad for me. I have a company card which I am an Authorized user for. Its been on my credit for about 4 years now, we are never late on company cards, we just like using them for the points, its helped my credit score for sure since a bankruptcy I had 4 years ago. 

Here is the deal: this card which I am an authorized user for has a 85k credit limit, we pay the card off every month and charges are usually 15-22k per month. However, on the credit reports it always looks like the balance is around 15-20k, never paid off in full... The problem is my wife and I would like to purchase a home in 5-6 months. I am wondering if this card which carries a large balance is going to hurt my debt to income ratio. 

I am reading conflicting stories when I look this up... Some websites state mortage companies will not count it in a Debt to Income since I am an auth user and not responsible for the balance, other websites say it does. My score is around 700 with my lowest on TU being 650.  I am worried if I remove it from my credit my score will drop, should I just wait until my wife and I are starting to get pre-approved for a loan to see if this will cause issues? If so I could remove it then it may take up to 30 days for it to be removed from my credit...

My wifes and my own credit cards we have paid off in full. With only school loans and a auto payment all to be paid in full in the next 24-36 months.

[Anonymous]

DTI is not part of FICO scoring, but is certainly part of the loan qualification process.

For scoring purposes, the related issue is one of utilization.

If the CL on the AU card is much larger than your personal CLs, and it's counted in utilization, then it may tend to dominate the proceedings.

What exactly is the AU card doing for you, that you are afraid of losing?

[majesticsky]

Lenders will look at my DTI, if they see that only 20k is used out of the 85k, wont this help me? Showing I have available credit and never close to maxing on this AU card? My  own personal cards are 12k limit Discover with 0 balance and a 7500 Wells Fargo with a 0 balance. its nowhere near the 85k card however.... If this AU card were removed, wouldnt my score drop?

I have no other loans on my credit since I have paid off my own personal student loans and auto loan last year.

Thanks for your help!

[Anonymous]

DTI is not part of FICO scoring, but rather is a measure of your ability to repay a loan.

For FICO scoring, the big issue is whether and how the 20 / 85 factors into your utilization.

You have $19.5K of personal CLs, with 0% utilization.  If you then add in the AU, it's $20K / 104.5K, or 19%.

In this case, both the 19% and the absolute amount owed are issues.  I'm not sure whether the AU factors into utilization, but if it does, it might be a problem.

Having an $85K AU line might be a benefit, but if it's showing a large balance, then you might wish to check into things a little deeper.

It's also worth noting that you can control the reported $20K balance, by paying off the card before the statement date.

[majesticsky]

We pay off this card every month. but with the recurring charges on this card each month, it will never show as fully paid off, not sure if banks when they pull the credit actually show the amounts paid on the account every month?

[Revelate]

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@majesticsky wrote:

We pay off this card every month. but with the recurring charges on this card each month, it will never show as fully paid off, not sure if banks when they pull the credit actually show the amounts paid on the account every month?

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They do, but unfortunately that's irrelevant to the current FICO algorithms.

What I would suggest (and what virtually all the forum users do when they need to pretty up their report) is to pay before the statement cuts: what's reported for the majority of lenders is the statement balance, so assuming the recurring charge lands on the account even just a few days ahead of the statement cut, make a payment immediately and it can be reported as fully paid off if you so choose.

[AndySoCal]

Am I understanding the AU account is related to your business or employment  correct ?   Is the card in the company's name with you as an AU?

[RobertEG]

I see two issues.

First as a business card, it seems inappropriate as the source for even granting an AU status to a consumer credit report of another.

Second, regardless of the score impact of having having the AU report, a mortgage lendor may well request its removal as part of their evaluation process.

Whenever you have an account history that is not your own reporting to your credit file/report, it automatically makes any score produced not representative of your own personal risk.  The creditor will have no way to back out that account and produce a score that represents only your own risk.

It thus may place into queston the value of your score in their decision making.

[Revelate]

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@RobertEG wrote:

I see two issues.

First as a business card, it seems inappropriate as the source for even granting an AU status to a consumer credit report of another.

Second, regardless of the score impact of having having the AU report, a mortgage lendor may well request its removal as part of their evaluation process.

Whenever you have an account history that is not your own reporting to your credit file/report, it automatically makes any score produced not representative of your own personal risk.  The creditor will have no way to back out that account and produce a score that represents only your own risk.

It thus may place into queston the value of your score in their decision making.

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A number of business cards report to personal credit for whatever reason: plusses and minuses to that I suppose, but I would expect that their AU's likely do as well.

If it were me in run-up to a mortgage, I'd likely airstrike it regardless if it wasn't going to be paid early... which is the likely case with a business card (and expense reimbursement) which I blatantly missed when I read through it quickly previously.