How Do Credit Scoring Systems Consider Authorized User Tradelines?

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Many consumers are perplexed as to how tradelines can assist them with their credit scores. These scores tend to be a bit mysterious as there are numerous paths to attaining both poor and good credit. There is not just a single answer, and in many cases, the best course of action for a consumer is individualized based on his or her specific situation.

However, for many people, one great course of action for building credit is to become an authorized user on a credit card. It is a good idea for many parents to put their 18-year olds onto their credit cards. An authorized user will have the same permissions as the main cardholder but without any of the debt liability. Therefore, it is an advantageous way to build up a young person’s credit early on.

How Authorized Users Are Considered on Credit Scoring

As an example, say you are an authorized user on a credit card account that ends up being reported or furnished. That information will go to the three major consumer credit reporting agencies, and it will end up on all of your credit reports. This discrepancy becomes calculated into your total credit score.

In most scenarios, the authorized user ends up benefiting from this transaction. Your credit report shows your balance, credit limit and the age of the account, and all of these are good to have, especially when you are just starting out. However, all parties responsible for the credit account need to take caution. In the event one person makes a wrong move, then everyone on the account ends up suffering.

Years ago, numerous authorized users were being abused as part of a credit repair strategy to momentarily increase consumers’ credit scores. In 2007, it came about that the credit scoring company would no longer count authorized user accounts in the future credit scoring system. This wound up protecting lenders from the act of piggybacking off of someone else’s credit card account. The company ended up rescinding this position after consultations with both the Federal Trade Commission and Federal Reserve Board.

How Authorized User Tradelines Are Incredibly Helpful

There is a variety of ways having an authorized user tradeline can help with your credit report. First, lenders like to see positive data on your report, which has nothing to do with the credit score itself. As long as the credit card has been open for a long time, then that gets factored into the total amount of time you have had a line of credit open. This is great even if an 18-year old decides to open his or her own credit account.

Having an account of less than a year old will not help you too much in the immediate future. You need to build up your credit over time by having adequate credit utilization ratios. You also need to show that you are capable of paying off your debt on time. It is a good practice to pay off your credit card every month. Not only does this prevent interest from building up, but it shows you only spend whatever is within your limit.

The only real circumstance where an authorized user tradeline will hurt you is if you sign onto an account that has a history of late payments. You may only be 18 years old, but it is still a good idea to talk to your parents about what their payment history is like. Hopefully, your parents have been responsible over the years, or at the very least, they have been responsible within the last few years. If they have not been, then you may be better off staying out of their accounts. It could end up damaging your own credit score right off the bat, and that is the opposite direction you want to go in.

Improving Your Credit Score

Tradelines are incredibly useful for attaining good credit scores early on in life. Credit scores affect your ability to get a good loan rate on a car, and eventually, you will need a good score when you want to purchase a house. If you need help with this endeavor, then make sure to contact Coast Tradelines. Reach out to us by phone or through our online form to get started on your path to better credit.