Q. When I was under 18, my parents added me as an authorized user to one of their credit cards. However, since then, they have accumulated a lot of debt on that credit card that now negatively impacts my credit score. I am continuously getting denied from credit card applications of my own.
In terms of damage control, is it better for me to stay on the card and wait till they pay it off (however long that takes) or try to get myself removed as an authorized user?
Being an authorized user on a credit card can have benefits and drawbacks. Removing yourself as an authorized user can have a different effect depending on the circumstances. From what you tell me, it looks like the high debt accumulated on your parents’ card is having a negative impact on your credit report. Unfortunately, there are no quick fixes to rebuild your credit, but you can accomplish it with discipline and consistency.
Now, let’s look at your options. If you decide to remove yourself as an authorized user, the account and any information associated with it will be removed from your report. If you don’t have any other credit cards or loans on your credit report, you won’t have any information to calculate a score. If you have other credit cards or student loans, the effects will be different and hard to predict. Rebuilding your credit can be tough, but it’s doable, even if you are starting from scratch. Your best option is to get a secured card. These cards mostly work like regular credit cards except that they are secured by the money you pay to the creditor when you open the account. The amount you pay, typically $300–$500, becomes your credit limit. If you use your card strategically–pay on time and in full while keeping your utilization rate low–it can help you establish a new credit history. After six months or so, you should start to see an improvement in your score.
If you decide to remain as an authorized user, what happens to your credit will depend on your parents. If they put a repayment strategy in place, you should start to see results over time. How much and when is hard to predict. If you remain as an authorized user and get a secured card, it could help you improve your score a bit, by increasing the amount of available credit and decreasing your utilization ratio. Exactly how much it can help is very hard to predict.
Regardless of your choice, consider getting a secured credit card to start the rebuilding processes now. And then, think about what your short-term and long-term goals are. Credit takes some time to rebuild, but it can be done with the discipline and the right strategy. If you still have questions and need additional guidance, I suggest you talk to an NFCC-certified credit counselor. Counselors can help you review your overall financial situation and give you personalized recommendations to help you make the right decision.
Bruce McClary, Vice President of Communications
Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.