We always preach that you must open new lines of credit to repair credit after bankruptcy, and becoming a credit card authorized user is one way of doing this. That said, you must follow specific steps to become an authorized user and begin the process of building your credit. You will need to:
- Protect the account holder.
- Protect yourself.
- Ensure that the credit-scoring systems recognize your status as a credit card authorized user.
Let’s start by explaining what an authorized user is. An authorized user is a person who has permission to use another person’s credit card. This person, the account holder, contacts the credit card company to ask that the credit card authorized user be added as someone who can make purchases using the credit card.
Of course, this can cause a big problem for the account holder. The account holder might worry that if you become a credit card authorized user, you could go on a shopping spree, max out the credit card, and then fail to reimburse the account holder for your purchases. As such, many account holders will refuse to add your name as an authorized user, especially if you have a poor credit history and a bankruptcy.
To protect the account holder, explain that s/he need not issue a physical credit card to you. Rather, you will be added in name only, which will allow you to “borrow” the person’s credit history while still protecting the account holder from any irresponsible behavior on your part.
If your name is added as a credit card authorized user, the account holder’s credit score will not drop unless you mishandle the account. If you never have access to the credit card or account number, this cannot happen.
That said, what if the account holder mishandles the account? Your credit score will drop, which is the last thing you need after a bankruptcy! Leveraging another person’s credit history by becoming a credit card authorized user only works if the account to which you are being added is and remains in good standing. The account should:
- Have no late payments associated with it.
- Have a balance that never exceeds more than 30 percent of the limit, per our post about credit cards and bankruptcy.
Of course, if these things ever change, remove your name immediately from the account!
The final component of becoming an authorized user is to make sure that the credit-scoring systems recognize your status as an authorized user. This requires two things:
- First, be sure you are being added to a family member’s credit card. In the past, people abused the benefits of authorized users, sometimes even “buying” an authorized user status on a complete stranger’s account in an effort to boost their credit score. The strategy worked, until credit-scoring systems got wind of it. Now they only pay attention if you are closely related to the account holder. If you live with the account holder or are a direct family member, your status as an authorized user should be recognized.
- Second, have the account holder ask the credit card company if they report authorized users to the credit bureaus. If they do not, your score will not benefit from the account.
Your goal is to get the credit bureaus to factor your standing as a credit card authorized user into the formula used to determine your credit score. If the account is in good standing, your credit score should increase, even though you have a bankruptcy on your record!
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Are you freakin kidding me? “borrow” the credit card holders credit history..You mean Lie and Steal and Cheat, don’t you? If you “borrow” as you say, the person that filed bankruptcy isn’t learning a thing on how to be responsible with credit..One of the DUMBEST things I have ever heard of..
My credit score last year got lower because i have some unpaid bills on my credit card company and i also lost my job.:*;
Although I would’ve preferred if you went into a little bit more detail, I still got the gist of what you meant. I agree with it. It might not be a popular idea, but it makes sense. Will definitely come back for more of this. Great work
I agree, but after a bankruptcy, you need to reestablish your credit the right way by getting new credit cards. If you don’t follow simple bankruptcy facts, you will never recover after a bankruptcy. For more information, enroll in our free teleseminar HERE.
Jake – love your passion! Keep it coming!
The fact is that after a bankruptcy, it’s critical for one to reestablish their credit the right way, NOT go back into debt. Keep reading my posts on Bankruptcy Facts, as you will see that I’m not telling people to do that, like you, I believe in learning from past experiences.
A well thought out presentation of the facts. I just wish more people would be so thorough and enlightened. Thank you.
Hi just thought i would certainly let you know something.. This is 2 times today i have landed on your website in the last 2 weeks searching for completely unrelated things. Spooky or what?
always make your credit score higher so that you have a good credit~”-
Okay what if my wife opened the account and she put me down as joint but i never used the card or new that it existed am i still liable. since now she filed bankruptcy.
we can’t avoid to have some credit on banks or from other people, there are just times that we are short of money~~’
we can’t avoid to have some credit on banks or from other people, there are just times that we are short of money’::
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we may always need to do some credit specially if we weant to invest on something .,`
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