Impact of Being an Authorized User on Parent's Credit Cards

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MarkerFM
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Impact of Being an Authorized User on Parent's Credit Cards

Post by MarkerFM » Tue Jun 30, 2020 4:02 pm

A discussion on another thread got me thinking about this subject. I didn't want to derail that one or go too far off topic, so I'm starting a new thread.

I have two young adult children who are authorized users on two of my credit cards. Each card has a credit limit of $100,000. Monthly spend on one is very low, <$1,000. Spend on the other is between $10,000 and $20,000 a month. Balances paid in full each month.

Kids have credit cards of their own, but I do not know the details. They probably don't have limits much larger than $5,000. One makes approximately $50,000 per year, the other just north of $100,000. They have no auto, student or mortgage debt, and I'm almost certain they do not carry credit card balances.

One card comes with Admiral's Club privileges (not useful now, but will be again some day). The other is an American Express. They have been authorized users since high school, and they used to use the cards to charge expenses, especially during college. Amex used to be primary, now the Citi card is.

Some comments in the other thread make me wonder if keeping them as authorized users could be hurting their credit scores? If so, how much? I do not know their credit scores.

RudyS
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Re: Impact of Being an Authorized User on Parent's Credit Cards

Post by RudyS » Tue Jun 30, 2020 4:56 pm

The easiest thing to do is to get their credit scores such as from CreditKarma. I did that for DW, and was surprised to see, that with no cards of her own, just being an authorized user on mine, she had an 800 score. She did then apply for a card in her name, so she would have a functioning card and her own credit if/when something happens to me. No problem with her application, they gave her $15K limit.

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grabiner
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Re: Impact of Being an Authorized User on Parent's Credit Cards

Post by grabiner » Tue Jun 30, 2020 5:23 pm

If it matters, your children should get an actual score with proper reason codes. If their scores are low because "amount owed on revolving accounts is too high", they may be being hurt by your cards. More likely, they are being helped by the accounts if they are counted at all; they have additional open accounts with a long history.

Credit Karma doesn't help with something like this, as it summarizes each of the credit factors into a single number. The number of accounts is important, but so is whether the accounts are open or closed, and which type of accounts they are. Likewise, the percentage of on-time payments is important, but so is how serious the late payments were, and how recent. The reason codes are written as reasons for denial of credit, in decreasing order of importance.
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JBTX
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Re: Impact of Being an Authorized User on Parent's Credit Cards

Post by JBTX » Tue Jun 30, 2020 5:37 pm

Exactly the opposite. Them having that high credit line card on their credit report decreases their credit utilization substantially, which helps a lot, and also possibly increases the avg age of cards, which helps a little.

My daughters credit score is in the 700s with very little credit history due to 2 cards that have high limit and are very old. She doesn't even actually have the cards in her possession. I know another young guy who dropped a long running card off of his report (he didn't know what it was or why it was there) and when they did his score dropped over 100 pts.

Of course if you added them to a maxed out card that probably would hurt

ballons
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Re: Impact of Being an Authorized User on Parent's Credit Cards

Post by ballons » Tue Jun 30, 2020 5:41 pm

No it does not hurt. Long term, if you eventually remove them, it may have an impact. Depends on their own credit limit, utilization, etc. Getting reports from AnnualCreditReport.com will show if AU are even reported.

Unless they are buying a house/car very soon, I would just give them a heads up and remove them.

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