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Sometimes a friend or relative may offer or ask if another friend or relative wants to be an authorized user on his or her credit card. There are many reasons for wanting to add an authorized user on your account, such as to help an elderly relative, to have a business partner have access to an account used mostly for business, to allow an adult child access to your account for emergencies and many more. If you are asked to be an authorized user, say no. If you are considering asking to be an authorized user on someone else’s account, do not. If you already are an authorized user, have your name taken off the account as soon as possible.
Having your name on someone else’s account can cause a plethora of problems and put your credit rating in jeopardy. Being listed as an authorized user on someone else’s credit card account will result in that person’s payment history being reported on your credit report as well. This is a good thing if you have no credit, because you can actually build up your credit if the main accountholder has good credit and pays her bills on time. However, this is a dangerous game to play with your credit rating, something you have for life.
Ask yourself, what happens if the principle accountholder habitually pays late? What happens if the account is charged-off or the accountholder files bankruptcy? That information is reported to the authorized user’s credit report as well. It will damage your credit rating just as severely as it will damage the main accountholder’s credit rating.
Any attorney will tell you that an authorized user never signed a contract with the credit card company and cannot be legally held responsible for the debt. Nevertheless, credit bureaus continue reporting the payment history of the principle accountholder on the credit reports of authorized users. There is not a federal or state law that prohibits them from doing this, but a few lawsuits have been filed by people who have been damaged by this practice.
Take into consideration the divorced man who cannot get a home mortgage because he is an authorized user on his ex-wife’s credit card and she filed bankruptcy which was reported on his credit file. Or the grandmother who put all her adult children on her credit card in case of emergency. However when she passed away her estate took several months to be settled. During that time, the credit cards went unpaid and the late payments were reported on all the children’s files.
The credit bureaus claim that the practice of reporting the accountholder’s activities on the authorized user’s credit report is justified, but they never state why it is justified. Could it be that they have adopted this policy on behalf of the hundreds of credit card companies who subscribe to their services? Perhaps this is the real reason why since every day authorized users are effectively blackmailed in to paying credit card debt they are not legally obligated to pay by the credit card companies simply because the main accountholder will not pay.
What many authorized users falsely believe (or are told) is that, if they pay the delinquent debt of the principle accountholder, they can restore their credit ratings. But this is not true. One of the most common myths about credit repair is that paying off delinquencies will result in them being removed from one’s credit report. Even if you paid the account in full, the delinquent notations remain on your credit report unless you succeed in getting them removed or seven years have passed.
First, make sure you are not the authorized user on someone else’s account. If you are an authorized user, an “A” notation will appear on your credit report in the left hand column. Your parent may have listed you as such when you were a teenager or college student because they thought it was the right thing to do. Your elderly parent might have listed you as an authorized user even though you are middle-aged. You might be listed as an authorized user on the account of someone you live with or are married to. If so, ask the person to call the credit card company and have your name removed as an authorized user so the account will no longer be reported on your credit report. Also, ask your relatives not to list you as an authorized user in the future and explain to them why they should stop doing this. If you are going through a divorce, insist that your ex-spouse remove you as an authorized user from any credit cards as part of the settlement agreement.
If a creditor or debt collector is pressuring you to pay a debt on a credit card when you were nothing but the authorized user, we recommend that you take the following steps.
- Do not agree to pay the debt or send in any partial payment on the debt no matter what they threaten to do. Paying the debt will not improve or restore your credit rating.
- Find out if you are indeed nothing more than an authorized user. In other words, make sure you are not really a joint accountholder, which would make you liable for 100% of the debt. You can do this by pulling your credit report. On the credit report you will find a single letter notation that designates you as a J – Joint accountholder or A – authorized user on the account in question.
- If you are nothing more than an authorized user, send the creditor or collector a certified mail, return receipt requested letter denying liability for the debt on the grounds that you are only the authorized user and are not legally responsible for the debt. Enclose a copy of that portion of your credit report showing you as nothing more than the authorized user. Tell them to leave you alone, stop calling you and that you will be report their attempt to collect a debt from you when you are not legally responsible for it to the Federal Trade Commission and the Attorney General’s office of your state. If you know in what state the creditor or debt collector’s company is based, you can also file a complaint with the Attorney General in that state for their deceptive trade practices.
It is important that you take the time to write the certified letter above because you want written proof that you disputed the debt and that the other party received notification that you disputed the debt. Legally, a creditor or collector is not supposed to add a collection account regarding the matter to your credit report if you dispute its validity within a timely manner.