Will it help me establish credit if my aunt adds me as an authorized user on her

[Lillian]

Hi. I’m 22, work full time and earn reasonable wages. I recently applied for a car loan and got denied because I have no credit history. My aunt suggested adding me as an authorized user on her credit card. She has excellent credit, and so she says that I will have also good credit. Is that true? Are there any downsides to this?

[Tracy Winters]

It used to work, but no longer

Authorized user accounts only count in FICO scores for spouses and kids. It’s called Credit Piggybacking, it’s perfectly legal and Fico recognizes it.

Authorized users do not benefit directly from the credit score of the primary card holder. Credit scores are individual. But the credit card account will appear on their credit report, so when the primary card holder makes timely payments it builds credit for the authorized users as well.

If your aunt adds you as an authorized user, the account will appear on your credit report, but Fico will ignore it and it won’t build any credit for you.

In the past the practice was exploited by “credit clinics”. People would pay thousand of dollars to be added as an authorized user of a complete stranger with a stellar credit score. A few years ago Fico blocked it, but kept it open to close family members.

If your parents can’t add you to their credit card, you may have to start building your credit with a secured card. See establishing-credit-history.html for more information.

There are two downsides to credit piggybacking:

1. The same way it build your credit, it can ruin it if the primary card holder stops making payments
2. The credit card debt counts in you debt-to-income ratio, so it may make it harder to get new credit

For this reason I always advise people that down the road, after they have established their own credit, ask the primary card holder to remove them from the card.

[Author]

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