When to remove children as authorized users and what impact does this have on their credit scores?

[Anonymous]

My appologies if this is a reposted question.  I've searched the forums for a good exit strategy when using authorized user accounts to help build children's credit, but I've only really seen reasons why you should or shouldn't add your kids as authorized users and how this will affect your scores. However, I haven't seen much information on what impact it has when you remove your kids, once they start establishing credit on their own, with their own primary accounts.

So I'm curious, for those of you who have helped build a credit score for your kids with authorized user accounts: what was your exit strategy for taking them off your accounts once they're old enough to apply for their own cards and loans?  And how does this affect the length of their credit history?

Also, what strategy have you used for selecting what cards to add them to? For examplpe is it better to add them to a "keeper card" that you know you will never close, and just keep them on that account as an AU indefinately, rather than a premium (annual fee) card that you might end up closing in the future?  Or is there any disadvantage to adding them as AU to both cards, assuming you have good credit to begin with.

[thornback]

It depends on the creditor and whether AU removal prompts removal of the entire tradeline or just results in closure of the tradeline on their reports.

If it prompts tradeline removal, it will negatively affect their length of credit and drop their scores - how much it drops depends on how much age is lost.  

If its just a simple closure, the tradeline will generally remain on their reports for up to 10 years and continue to age and be factored into their length of credit.  Closure will have little to no effect on scores. 

In my opinion, if you're going to add kids as AUs, do so on a keeper card and leave it indefinitely-- you can take the physical card from them and just leave them listed as an AU. 

I dont see a need in keeping them on more than one card (unless they're actually using them).  Putting them on the oldest avail keeper is sufficient (one that maintains a low, but non-zero balance). 

The plus of adding them to a rewards card that they also use is, of course, the increased accumulation of rewards which would be of benefit to you.

Just check with your lender to see how they handle the removal of AU accounts (tradeline removal or just closure).

Welcome to the forums!

[Anonymous]

Thank you for your excellent explanation!  I will research how my creditors handle AU closure reporting and find the best keeper card to add them to, with the assumption that I MIGHT remove them in the future, so best to know how the CC company will handle that reporting when/if the time comes.

The only reason I was considering multiple cards was for the benefits of something like the Amex Gold AU card (TSA Pre/Global Entry fee credit).  Since I'm already paying for the Platinum annual fee, seems like a good way to get some additional value, or when they're older and can take advantage of the travel perks, upgrading them to the Platinum AU cards.

First world problems, I know.  But I really appreciate the help!

[thornback]

Adding them to your travel cards -- assuming they'll be using the cards -- is a good idea - rack up those rewards -- my parents did that -- my brother ran up the balance and got his AU card snatched, I did not - i'm the good child 😊.  But *they* (they did not share) enjoyed every bit of the rewards gained from our additional use. 

 You can add them to both a keeper and one or more of your Amexs. 

[GApeachy]

I removed my ds from one of my cards and it dropped his score 15 pts. plus it had the remarked "terminated"....I thought that looked bad. Mama Bear here.  So I added him back, got his pts. back pdq and the "terminated" being removed made me feel better.  I didn't want it to look like he abused his privledges and I nixed it. 

That's just me being all protective but the 15pts. was real.  Now that his file is another year older and has added another $30k in credit it probably wouldn't hurt him score wise like last time....but that "terminated" wording would still bother me.

[RobertEG]

A significant factor is what type/amount of credit is the AU expected to seek.

Whenever a consumer has AU accounts included in their reports/scoring, then by definition, the score is no longer representative only of the credit history of that consumer, but is also based in part on the credit history of another.

Creditors are aware of that when considering the grant of new credit IF they do a manual review of the consumer's credit report, which will clearly identify by ECOA code those accounts that are AU accounts.

If the amount of credit is relatively low, such as for those building or rebuilding credit, the creditor may choose not to do a manual review of the consumer's credit report for efficiency reasons, and rely only or primarily on the score presented.

However, as the type or amount of new credit increases, creditors are much more likely to conduct a more detailed review, which includes a manual review of the consumer's credit file.

Upon seeing that the presence of AU accounts, they may discount or ignore the calculated score, or may require removal of AU accounts so that they can then obtain a "real" score based only on the applicant consumer's own proven credit history.

The time to cut the AU cord may thus also depend upon the degree to which the creditor might view the presence of AUs in their uderwriting consideration.....

[Anonymous]

Yeah, @GApeachy when you terminated AU status, the account obviously remained on the report and was therefore still contributing to age, if it was in the first instance. Therefore it must’ve been due to the reduction of available credit and increase in utilization that caused the score to drop, unless that put the profile under 3 open cards?

And there’s nothing negative about terminated, it’s just the terminology they use when you stop/terminate their privilege to charge on that account, but I understand the language didn’t sound good to you.

[GApeachy]

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@Anonymous wrote:
Yeah, @GApeachy when you terminated AU status, the account obviously remained on the report and was therefore still contributing to age, if it was in the first instance. Therefore it must’ve been due to the reduction of available credit and increase in utilization that caused the score to drop, unless that put the profile under 3 open cards?

And there’s nothing negative about terminated, it’s just the terminology they use when you stop/terminate their privilege to charge on that account, but I understand the language didn’t sound good to you.

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Utilization did go up.  But what I hated was that I was responsible for that nasty word on my son's credit report like he was a crackhead or something "terminated" lol......me just being an overly sensitive Mama Bear.  Don't go saying anything negative 'bout my boy....and look what I did. Got him deemed "terminated". So once I put him back on my card again, the following month his AU status updated and he gained back the points lost in utl. and I was a happy Mama again.  Yeah, you guessed it right @Anonymous  that padding meant a lot esp. on a thin, young file.  He had 3 cc's but losing my card hurt at that time.  It wouldn't now but I'm not doing the "terminated" thing again...ocd.

[Anonymous]

Hey thanks for that info!  I was just reading that creditors can see if an account is primary or AU on the credit reports, so that is something I'll have to keep in mind if my kids apply for any loans after they turn 18.

The main driver for building their credit score is to help them qualify for decent cards when they turn 18 and can start building their own credit with their own primary accounts.  I figure it will be easier for them to qualify for good cashback cards with a decent score.  I wish my parents had taught me this stuff.  1 or 2% might not seem like a lot, but it sure adds up over a lifetime. This would have helped even more when I was on a shoestring budget in college   So hopefully it's something they'll understand and appreciate some day.

[NoHardLimits]

Just something to be aware of since you mentioned the Amex Platinum card...

Amex reports AU account dates differently than most other banks.  The AU's credit report will show the account with an opening date equal to the day he/she was added as an AU.  They will not receive a tradeline backdated to the day the account was first opened.