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.