Can Dropping an Authorized Person Hurt My Credit?

Dropping a person authorized to use your credit card -- meaning the person does not pay the bill or have legal liability to ever do so -- won't help your credit, but it can be one of the best ways to preserve your rating. In general, authorized users present a huge liability to the primary borrower, and lenders often ignore authorized accounts.

Identification

Although an authorized user's credit rating can benefit from piggybacking on your account, dropping him will have no effect on your credit rating, according to Maxine Sweet of Experian. The only thing jointly held or authorized accounts affect is reporting. When you own the primary account, the credit bureaus report the account history on your credit history and the authorized user's.

Benefits

Because the authorized user can spend money on your limit, he presents a significant threat to your credit score. If the authorized user were to max out the credit limit and skip out of town, for instance, you would have to pay the bill. If you could not afford at least the minimum monthly payments, late payments and any delinquent accounts further erode your credit rating. Also, you have no legal recourse against an authorized user to recover payment for charges he made.

Considerations

Friends and family often help each other build a good credit score by adding each other as authorized users. However, authorized accounts may not help a person build a credit history. Lenders often ignore authorized accounts because the user has no need to pay, so it is not an indicator of the debtor's willingness to repay debt. Also, the credit reporting bureaus can weed out fraudulent accounts, such as when someone pays a person with good credit to piggyback on their account.

Tip

Do not close the account after dropping the user. You want as much unused credit available to you as possible, and closing an account stops lengthening your credit history. If you want to help out an authorized user, consider buying him a prepaid debit card. If he needs to start building credit, you can direct him to a secured credit card and help him pay for the security deposit required for such an account.