Can a Credit Card Report on an Authorized User?

Unlike a joint account holder for a credit card, an authorized user gets to use an account, but is not responsible for bill. This type of account is often used for a child or anyone else who might need access to credit. You can also use this account to build your own or another person's credit.

Identification

As of 2011, the latest FICO score model---FICO 08---counts authorized users for credit scoring purposes, according to the Fair Isaac Corporation. However, this might change in the future. In the past, some credit-repair companies added people with poor credit to a credit card account with good history in return for money, so FICO disregarded authorized accounts for credit scoring purposes. The FICO 08 algorithm can weed out potential fraudulent authorized accounts better than previous year FICO models, so FICO decided to include them to help the millions of legitimate users build credit.

History

Prior to FICO 08, the Fair Isaac Corporation did not count authorized users, because of rampant abuse by credit repair companies adding customers to accounts with good history---usually strangers with no link to the primary account holder---and subverting the credit reporting system. FICO changed this with FICO 08 because 50 million people are legitimate authorized users, such as spouses and children of the account holder, thus hurting their ability to improve their credit score.

Considerations

Although Experian, Equifax and TransUnion dominate the consumer credit reporting industry, they are not the only credit agencies. Alternative agencies may not count authorized users or accept data about them from credit card companies. Creditors can also use their own proprietary formula and ignore certain accounts on a credit report, such as authorized accounts. Also, some lenders may not have upgraded to FICO 08 yet.

Benefit/Drawback

Someone with no credit history can start building good credit without applying for a loan or taking on the legal responsibility of owing credit card debt with an authorized account. On the other hand, an authorized user does not even receive the bill, so he damages his score if the primary account holder misses a payment. If the credit card issuer reports an authorized account, the authorized user can request the credit bureaus remove this from his file.