The internet rumor mill made even ME nervous about AU (authorized user) accounts. And once again, it turns out that there are just too many people with nothing better to do than spreading RUMORS.

Since AU accounts are THE way to get account HISTORY (extremely important for credit scores,) that was one of my first questions for Barry at Fair Isaac today.

Fortunately, they are rated just like joint accounts, and Fair Isaac has no plans to change that (it's required by some legislation.)

So, to all of you with NO credit or nothing but charge-offs and collections, it's time to look for someone who will TRUST you to put you on their credit and charge cards as authorized user.

Some GENERAL recommendations:

I can't emphasize GENERAL enough, because I'm sure there are situations when I'd change my recommendations - no 2 credit reports are alike, unless they're empty.

Get 2 or 3 store charge cards and 3 or 4 credit cards with at least several years history. It helps if you pick creditors who report to all 3 bureaus.

Even just ONE new good account can help a lot - one credit card with a 6 months history should get you the Target instant store credit.

The longer the accounts have been open, the better it is. Of course you also want high limits and LOW balances. AND, you need to make sure that the payment history is good, it's not reported as secured, and the credit LIMIT is reported.

It's best if you can review the account holder's credit reports first - and you need to check your own reports too to make sure they are reported properly.

If you had no or little credit, this should give you great scores. If you have "bad" credit, you need to work on that too. Those AU accounts can't hurt UNLESS the balances go over 20%. They should be used OCCASIONALLY.

You should subscribe to a credit monitoring service unless you're 200% certain that there will be no late payments.

If you have a "problem" AU account, notify the card issuer that you want to be removed and make sure it gets done. I.e. check your credit reports!

Once your credit looks as good as possible, start applying for your OWN accounts. DO NOT cancel the AUs right away. You need to establish your own HISTORY. Creditors periodically review your credit and they could lower your limit or even close your accounts if they don't like what they see.

Do NOT continue to apply for credit if you get turned down. Instead, call the creditor and some will be very helpful, tell you what underwriting criteria and/or scores they used and what your scores were. Post here and SHARE this info!

Because I can't post every possible scenario, please post the details of your problem in a new thread here if you get declined.

Your very best bet is to wait for the pre-APPROVALS in the mail, especially if you don't have any GOOD employment info to give out. Sooner or later you'll get offers that only require your social security number and signature. Of course it's always "up to" in small print next to whatever limit they put in huge letters on the mailing.

Keep in mind that sometimes creditors will actually look at your reports, not only scores, and they'll see the AU notations.

Also, I'm talking about FAIR ISAAC (Beacon, Empirica, FICO) scores, not about the worthless bureau scores (Experian and TU) that nobody buys except mislead consumers.

I recently saw an offer to PURCHASE AU account status for several good accounts with 3 years history for I think $1,200.

It COULD be worth that kind of money if it right away saves you several thousand in loan origination fees.

This opens the door to sideline income for people with good accounts - rent them out! I wonder how many AUs one can add to a card?

How do they keep the AUs from charging up those cards? Are ALL credit reports scrambling the account numbers or leaving the last 4 digits off?

I only look at the account numbers on the reports to see if they're duplicates. The AU might not actually get a card, I know creditors won't talk to the AU, so maybe that's how they keep people from charging up the accounts. The AU never knows the account # and expiration date.

Interesting. And apparently legal, I can't think of a law against selling AU status to someone.

The first problem: WHICH creditors REPORT the AU accounts on the credit?

Had a client try this, and one of the creditors didn't even ask for his address. During a subsequent call they said they don't report the AU.

1) Barry at Fair Isaac mentioned some kind of lending law that requires AU accounts to be reported just like joint accounts. Does anyone know what law that is? It's got an "E" in it, maybe the Equal Credit Opportunity Act? Something like that?

2) I just recently saw First USA (see my posting above) and Sears reporting the AU accounts.

Which creditors DO report the AU accounts?

Do NOT apply for JOINT accounts because YOUR bad credit will most likely cause the rates to go up and limits to be decreased, might even result in the account being closed. THEN the only way to UNDO this is for the account holder to CLOSE the account and reapply. You could destroy a long friendship over this.

Just saw some Citibank AU accounts reported.

Amex also reports AU accounts, but consumer beware, they don't report the credit limit just the high balance.

Dani

Thanks, Dani.

I just found this April 14, 2000 article on a pending class action against Equifax in my old postings.

Apparently Equifax refused to delete derogatory AU accounts.

So what happened to the class action?

And WHY are some creditors NOT reporting AU accounts on the AU's credit report IF this is paragraph from that article is accurate:

"That's because a federal regulation requires lenders to tell credit bureaus about authorized users of credit cards. The rule benefits widowed and divorced homemakers and recent graduates -- in other words, people who have little or no credit history, but who have carried cards belonging to a spouse or parent."

Summary:

Chase, B of A, Choice, Citibank, AmEx, Discover, Wells Fargo and First USA reported AUs recently.

Who else?

First USA reported to Equifax a $10K balance with NO limit or high credit for the Authorized User account.

That's odd since the First USA card that belongs to my client DOES show the credit limit.

Check you credit reports!

I also have one authorized user account from my parents on my report but I am wondering if anyone knows how the credit card issuer reports to the AU's file since I never provided anyone my SS # or anything. My parents simply provided my name and I noticed that the card is being reported to my credit report with the high limit and a 30+ history. By the way, the card company is providian.

IF your parents put you on as an A U the bank will match your name and their address. If the address is anywhere on your report (even as previous) thats how they access your report.

I attempted to "hide" a 20k balance by moving it to my dad's new account however it came right back on my report because I was an A. U. Most banks however, are pretty good about removing the A U promptly if you notify them that you want it removed. First USA requires the primary to call to remove the AU on their accounts. In your case however it will most likely benefit you to have the A U providing there are no lates and the balance is fairly low.

I'm suprised you guys have not done more experimentation with A U s. I the near future i am going to put a 5 year + credit card account with 20k limit on to a persons report who currently has under 6 months history but no lates. Then we will pull a score and apply for a few platinum cards. I'll let you guys know the results.

That makes sense.

Re. First USA - that 10k balance killed the scores. While I don't know what exactly First USA did about the AU's written request to cancel the AU card and delete the account from his report, it was deleted from all 3 reports in response to the simultaneous disputes. It took 2 disputes with Experian, the cancellation letter was included with the disputes.

Looking forward to read the results of the Platinum Cards applications - am expecting approval and a real nice score as long as theres several accounts.

So what about the AU accounts from people other than your parents. If I live at an address "x" and someone lives at an address "y" but my credit report only shows "x" since I never lived at "y" then if they add me as an AU it wouldn't show up on my report? Therefore the only people who can help you with AU accounts are those who somehow match an address on your credit file? Hmmmm, I recall Christine having posted a thread about people actually purchasing AU accounts from people just to build credit. So how do they do it?

This credit stuff is beyond interesting, I just wish I would have understood more when I was signing up for cards to get a free t-shirt or bag of m&ms at college...

Well, there are certain banks that do ask for the SS# of the AU. It just depends on the bank. Best thing to do is to ask them about thieir reporting policy before you add the AU. Ask what they need in order to add an AU. If they tell you name and social then you will probably have it added to your report no matter what addresses you have.

Fleet is an exception. They stated that they don't report AU s at all and so far I haven't seen any from them. All the other large banks seem to report.

Do you know anything about the ECOA? Haven't read it, but I think that's what Fair Isaac said the reason was WHY they have to rate AU accounts same as joint accounts.

So, maybe any lender NOT reporting the AU but reporting joint account holders could be in violation. But I don't know that -- haven't read the law ... just a thought.

Christine,

I had 3 First USA AU s and all reported the limits. I think your client's situation just may have been a data error. You could always get a 10k cash advance and send it back to first USA so the high credit column would take over. It would be well worth their $50 max cash advance fee to add that high balance history for someone that had limited credit. This is a good remedy for other banks that don't report the limit too. I do this with AMEX once a year because thats about how often they zero the high balance. Blue doesn't even charge a cash advance fee. Others vary but they run a max of $29-$50. You may be able to get a no fee transfer to checking if your beacon was good at the time of their last A/R.

I have not had a chance to research the ECOA but I have a feeling that your thoughts are correct. I can't imagine that any bank would want to fuel the competition by bumping up people's scores with the AU unless they were forced to. If the AU scores the same way as joint account, its like you can raise and lower the score with the AU just like a thermostat works an air conditioner. It's really to the bank's disadvantage if they have to extend credit on an otherwise unqualifying person but yet have to remove the AU s on the consumer's demand. I bet sooner or later there will be legislation to change the scoring effect of the AU but if it works, lets take advantage of it while we can.

Big Beacon, you can't take a $10K cash advance on an account with a 10K limit and 10K balance - all you can do is have the account deleted.

Also, getting the HIGH credit to be as high as possible is not the answer to ALL problems because accounts that do NOT report the LIMIT are scored differently by Fair Isaac - as per my phone conversation with Barry Paperno.

Fleet does report the Au! It just showed up on Experian. Called fleet and asked why 2 supervisors had told me that they don't. They replied: we are sorry to have misinformed you. It is not Fleet's policy to report the AU but it is a mandatory requirement in certain states. Sounds like BS to me but I will be investigating it further.

I can speak from recent experience that Citibank does report AUs.

I have both my parents on my Citi accounts as a courtesy. They do not get the cards.

I am on my brother's BP and Citgo (associates/citigroup) and am reported upon.

I am on my brother's Best Buy as an AU and have been there for five months and not reported yet. (Household)

My mother is an AU on my Target and it reports as joint.

I would pay BIG BUCKS to find someone with 2-3 years on a "good" credit card with perfect payment history and never see the card.

I desperately need my file to age. I wish I had seen those offers Christine referred to. I paid my brother $50 to get the two BP/Citgos and add me.