What Are the Advantages?
Did you know 15% of your credit score is calculated by the length of your credit history?
The credit scoring system looks at how long your accounts have been opened and the length of time since the last activity on each account. With a long credit history you can maximize your credit scores.
There’s a saying in the credit industry: “The best credit is old credit.”
But what can you do if your starting over again?
In step 1 we covered credit restoration, in step 2 we talked about establishing 3-4 active trade-lines by obtaining secured credit cards and in step 3 we covered how to use those cards by leveraging your credit usage ratio.
But while you’re beginning to build new payment history how can you build long term credit history? Do you have to just play the waiting game?
The good news is you don’t have to!
You can piggyback on someone else’s credit history by being added as an authorized user on their account. When you’re an authorized user, the credit card account and all of its credit history is added to your credit reports.
For example, let’s say your spouse has a credit card with a $5k limit and she has had it for five years with excellent payment history and currently has a $500 balance. If she adds you as an authorized user you would inherit five years of credit history on your credit reports with a trade-line that has excellent payment history with only a 10% debt to credit ratio!
Imagine what an impact that could have on your credit scores!
If you have a spouse, parent or loved one that can add you to their card, then you will see immediate benefits when it’s reported to the credit reporting agencies. But you must carefully select the credit card account you want to be added to as an authorized user.
For maximum effect it should have solid payment history, a low balance, and a long length of credit history preferably greater than 5 years..
The best part about this strategy is there no impact on the primary cardholder for adding you as an authorized user. In fact, the authorized user never gets a physical credit card, has no “permissions” on the account, and cannot call the card issuer to have a new card mailed to them.
On the flip side, you as the authorized user are not liable for any of the card’s purchases. You’re only being added as an authorized user not a joint card holder. A joint cardholder is a whole other ball game.
So how do you get added as an authorized user?
First, the cardholder’s relationship to you should fall under the following:
- Spouse
- Domestic partner
- Parents
- Family
Don’t pay for a service to artificially improve your scores by having someone you don’t know add you as an authorized user because you will get caught. FICO 08 claims that it excludes illegitimate Authorized Users.
Secondly, once you identify a cardholder they will need to contact their credit card issuer and request to add an authorized user to their account. They will also need to ask the issuer if authorized-user data gets reported.
Some issuers will report authorized-user information only if that person is a spouse so it’s important to confirm this prior to being added.
Some credit card issuers such as Capital One allow the cardholder to add an authorized user right online. Once an authorized user gets added it may take 30-45 days for the account history to populate on the credit reports.
Remember, authorized-user accounts aren’t a cure-all, it’s simply a powerful and legal strategy that can positively impact your scores by a adding positive trade-line with payment history.
For Questions or Payment Options
Call Today for a FREE No Obligation
Credit Consultation:
1-517-518-8847
Stay Tuned for Step 5!
Step 1 Step 2 Step 3
To your success in credit and life,
Marco Carbajo