1. Authorized User Accounts Explained

Hello, and welcome to this module authorized user accounts explained. So this is going to be a powerful, powerful strategy that you can use when the time is right to help give you an additional boost to your credit score. So what I’m going to do over the next few days is explain how this process works, but also in this module kind of break down how this really works and when you can use it. So here’s what we’re going to cover. So the first thing I’m going to do is break down how authorized user accounts works, uh, whether you’re becoming an authorized user or you’re considering allowing somebody to become an authorized user. I’m also going to give you the pros of authorized user accounts. Um, I’m going to give you the cons of authorized user accounts, um, when you can become an authorized user, if you’re considering becoming an authorized user, and then what data points i.e. what to look for when considering an authorized user.

So this module, although the majority of you watching this are going to be using this strategy to piggyback, or i.e. leveraged the credibility of somebody else, you are now understanding the power of credit, and you’ll be able to when the time is right add other people as authorized users to your cards, once you’ve done the things and the due diligence to be able to do it. So this is, this module is not only just considering the fact of becoming an authorized user, but allowing other individuals to be an authorized user on your credit as well when the time is right. So how do authorize user accounts where AU just stands for authorized users? So being an authorized user means you can use someone else’s credit card in your name and benefit off their credit history. So anytime you request to become an authorized user, what you’re really saying is, is that, Hey, look, um, or being an authorized user just allows you to be authorized to use that credit card. Um, but you don’t necessarily have any of the financial liability associated with the card because the primary card holder

Is at the end of the day, solely responsible. Um, it’s really, really simple to make you an authorized user. So all you need to do, if you become an authorized user is just the primary account holder who is responsible for that credit credit card. Simply add you, add you with their name, add your name to their credit card again in the basically when you authorization. So they’re going to add your name or likely your date of birth and some scenarios or social security card. In another module, I’ll get into specifics based off how issuers work and how the credit bureaus report this. But the moral of the story is, is that when you become an authorized user, that account holder is adding into the file. Now, a couple of key things here. So when you’re seeking to become an authorized user on someone else’s credit card, it’s highly recommended that you communicate that, Hey, look, I don’t want to have authorization or even have access to your credit card.

Really. I’m just looking to become an authorized user on your card because I want to be able to benefit from some of the history that you’ve already established. However, the flip side of this is is that if you are looking to allow someone to become an authorized user of your, of your credit card, obviously you don’t want them to use a card. Um, if you’re just looking to do this for them to build up their credit history, additionally, if you do allow them to use a card, you have to be very, very clear with how you set the boundaries for their financial allowances. So to speak that they can use on a card. My suggestion is if you allow somebody to become an authorized user, if you don’t have a good financial and good the relationship with them, I wouldn’t allow them to use a card.

I would just do it specifically for the benefits now, uh, in order to become an authorized user. Um, typically what happens is I was just, I was just really breaking on this point, is that either you as a primary account holder, um, you know, you will receive a credit card tied to the account though. You will have all the card privileges of the primary account holder. So again, my suggestion is you have that card sent to you as a primary account holder, or do you even communicate to the primary account holder? Let’s say, Hey, look, I don’t want to have access to the card, have it sent to your address? I’d simply just want, I’d simply just want that history. And the other thing is even, and if you are, let’s just say the flip side, because I’ve actually done the, the authorized user on both perspectives.

I’ve actually become an authorized user. And not only did I have access to the authorized user account when I was really rebuilding my credit, this is before I understood anything. I got my sister to add me as an authorized user on her credit report or credit card, so to speak. And I told her, I was like, Hey, um, I’ll continue to use both of these cards, I’ll use these cards responsibly, make sure they’re paid off on, you know, make sure they’re paid off and used. And she allowed me to use two of her essentially tier three credit cards for over two years. And I just established a really good relationship with American Express and Chase. And I kept them and I use them. I kept them, I paid them off, kept them, paid them off, kept them, paying them off. And I even started receiving some of the, uh, well, she started receiving, but she didn’t really, she wasn’t using the cards.

They were basically like my cards, but they were in her name, but I’ve benefited. I was building her credit in mine. However, I would, I couldn’t necessarily call the companies directly and say, Hey, look, I have a limit increase or can I do this? Or we’re going to do that because it was still tied to her as a primary account holder, although I was using them as my cards, right? So that’s a, that’s an extremely rare scenario that that will happen. But that just breaks down. Like if somebody is prepared to, and you know that they have the financial responsibility to use the cards, then in those scenarios and it would help you end them. However, the flip of that is, is that if you’re at a place nice, really the point I’m trying to drive home here is if you become an authorized user and you do plan on using a card, like I use my sister’s cards, then you can’t, you don’t have all the full benefits that they have, because again, the primary account holder is solely responsible, although you would assume the responsibility to, because it would just be good karma and good business sense.

The other flip side of that is that even if they, and if there’s rewards points and all that good stuff, all that stuff goes to the primary account holder. And not necessarily you, because it’s still going to be tied to the primary account holder. So this is just a really good example of how they work. My suggestion is that if you become an authorized user, you don’t even have access to the card unless, you know, or you can demonstrate that you can be responsible and or if you allow somebody to become an authorized user on your card, this eliminate failure is an option. Unless again, you know, them just, and not even know them, you just, just, just allow them to get the, uh, the benefit of the history. And the, and again, this scenario that I painted out was differently because these were brand new cards.

So it didn’t necessarily have any history. Right? I was building the history as I was using the card. So if you’re allowing somebody to become an authorized user, then it would make more sense really to have the history and you keep the card. Now, the pros of authorized user, I already kind of outlined them, but just to be clear, um, what it’s going to do in most scenarios, once you’ve identified the proper authorized user with some data points, I’ll cover is it’s going to increase your credit score as the authorized user, assuming that person already had some established credibility and some credit history, because, um, what that will do is it will increase your credit age. So let’s just say there was an authorized user account. And, and let’s just say, my sister did already have a really good understanding of credit. And she had credit for 15 years.

And she added me to one of her cards that I already had 15 years of credit history. Well, she added me to that card. Then I would automatically get 15 years. So that would increase my credit age. A better example I can give is my really good friend. She’s like 36, I think. And she’s had a credit card since she was like 19. So she has that many years and she’s never missed a payment grade utilization so that if she allowed people to become an authorized user on that card, then that would significantly impact their age. While at the same time, what it’s going to do is increase your overall available credit as well, because let’s just say that authorized user account is gonna already have that 15 years or 2 years or 3 years, or however many years of history. It will also have an available amount of credit.

So let’s just say that your current available round of credit you have, because of all the things I’m showing you, how to do, let’s just say you have available to you $30,000, and then you become an authorized user on someone else’s credit card. And they have an availability on their actual card of $30,000, even though it’s not necessarily your you’re not the primary account holder. When you, when you become an authorized user, you now have available to you an additional 30,000. So now your overall available credit is 60,000 because you became an authorized user. So what this is going to do is obviously increase your available credit either 35%. I mean the 30% or the 165 points. So assuming you had, let’s just say that scenario, we’ll keep painting this picture. Let’s just say that you were using 10,000 of your available credit of 30,000, whatever would be 30%, but then you become an authorized user.

Of course, you continue to make your payments on time. Now you have 60,000 in this scenario, I’m breaking down as opposed to 30,000. So this means that utilization would be cut in half from the 30% to roughly a whatever 10%, 10,000 or 60,000 is which I would assume that’s like 15%, right? Because if we just have it, so that, that is another way it does increase your overall available credit. Based off that example, I gave, uh, the biggest pro of giving an authorized user status or becoming an authorized user is you get the positive history and the overall available credit, add it to your credit report without having to spend the time building it. Right. And that’s, that’s really the key point here. So you’re getting the ability to benefit off of someone else’s credibility without you having to go out and do it yourself.

This is why I wait to, to break this down in week 9, because you don’t want to necessarily do this. When you have dirt in your glass, you don’t want to do this process when you’re still rebuilding your credit. You really want to do this. Once you’ve done all the principles that I’ve outlined, then you do this because it’s going to add that additional history at the end and give you that additional, that additional status. So to speak on your credit. But the other flip side of this as well is if you’re building credit and let’s just say, you have children and you want to have them, you want to do you want to get them started on the right path. Then you can make them authorize users on your accounts, assuming you meet the proper criteria and it’s not going to hurt them. So that’s the other flip side of this, this authorized user process right now.

So I’m going to cons that you need to be aware of. So whether you are becoming an authorized user or you’re considering allowing somebody to be an authorized user on your credit. So my suggestion, again, 95% of you guys are going to be doing the authorized user on someone else’s credit report. You’re requesting to become an authorized user. So you need to understand the cons. So the first thing is, is that on the it’s the primary card sole responsibility for making sure all the charges with or made on the card are paid. So if you choose to allow someone to become an authorized user on your credit report, and you choose to give them access to the card and you choose to allow them to spend the money, they don’t have to pay that. It’s not their responsibility, it’s yours. So you need to be really, really, that’s why I’m saying, if you are looking to allow someone to be an authorized user, you keep the card.

Now the flip side of that is also true. Let’s just say you don’t get access to the card. You don’t make any financial transactions. You’re just literally doing it because you want to get the history and the available credit added to your credit report. Well, the primary holders, lack of financial responsibility will have a negative impact on your report because that information is going to be reporting on your credit file. For instance, high reporting utilization and miss payments would drop the score too. So if that authorized user individual that you go to, because you can become an authorized user on anybody’s credit report, right? Or anybody’s credit card, I should say, not credit report. And then have that information added to your credit report. This is important because I’ve seen this so many times what people say, yeah, my husband or my wife, or my friend added me as an authorized user and their friend, husband, wife, or whoever doesn’t really understand credit.

And because they don’t understand credit, what happens is now you have high utilization on your credit report and you have missed payments on your credit report because everything from their credit report for that card, not only is reporting on theirs is reporting on you. And what I’ve seen to happen is it, it causes tension or distress in person relationships. If the arrangement fails, i.e. if you, if you become an authorized user on someone else’s card and they’re not using it responsibly. So what went out to become a favor, i.e. a tool to use to help you build credit. It actually backfires. And the other, other part of that is true as well. So if you are an authorized, if you allow somebody to become an authorized user on your credit report or your credit card, I should say, and then you’re unable to make your payments or whatever the case is, the number one, you need to be up front, but I would be led to believe you wouldn’t, that wouldn’t happen to you, but in the rare circumstances that you allow someone to use an authorized user credit card, i.e. make financial transactions and they choose not to pay it.

And you don’t have the funds. Then that would also cause tension. So you just need to be aware of the kinds of moral of the story. If you’re looking to become an authorized user on someone’s credit report, make sure that they are financially responsible and they’ve already demonstrated based off the data points. I’m going to cover that they will be a good fit to allow you to essentially piggyback off of their credibility, which typically when people allow you to do this, and you, if you find somebody that you know is responsible, then you don’t have to worry about this. Now, when should you become an authorized user? Well, the first thing is after you’ve completed the first eight weeks of the 700 Credit Score Academy, and then more specifically after you’ve not only completed the first eight weeks, you, you not, you, you, you also, cause you could have completed the first eight weeks, and you’re just going through this, your first run, but you haven’t gotten the results and I’m going to break down.

So it’s not just you completed the first eight weeks you’ve completed, you’ve implemented and you’ve executed all of the exercises and you number one already have the holy grail credit mix. So you already know what this is. If you’re in week nine, if you have not implemented the holy grail credit mix, and you need to have that in place, especially the revolving accounts that we outlined, then, um, all the negatives are removed from your credit report. So again, it makes no sense to put clean water. i.e. an authorized user credibility and all this good history and, or on a credit report, that’s dirty, i.e. a dirty glass. So we need to make sure that all of the negatives have been removed from your credit report. It’s okay. If you have missed or late payments, that’s totally fine on open accounts, but I’m talking about collections, charge offs, all those, those bankruptcies.

You, you want to really, I mean, you can add it, but again, it’s like one of those things, why would you pour clean water in a dirty glass? Why, why would you add great credit history to a credit file? That’s not looking good, because again, as we already understand, at this point, the content of our credit report is much more important than the score. So although you could and you will get the score increase, you won’t get the approval because your score, i.e. your content. So to speak, I should say, your content is not indicative of the score that you have fictitiously created, which is why I say you want to do this at the end. The other thing is, is that you want to become an authorized user when you’re looking for that extra boost in your score. So you’ve done all the things I’ve outlined.

You’ve done everything. Now. You’re just looking for that extra boost, that extra amount of age. And this is really, really good before you’re applying for big ticket purchases. So it’s not necessary, but once you’ve done all the things above you have a credit mix, you have all the negatives removed. Do you even implemented some of the things that I break down in week, um, in week 8 regarding thinking like the banks and applying for another credit, again, you can, you can do this and it will help you. Um, even if you want to attempt to get higher limits and not, and then every single time it works. But again, this is when you want to become an authorized user. So let’s go ahead and just break down the data points on what to look for. So I think it goes without saying on what you should be looking for.

If you’re looking to become an authorized user, um, at this point, I’m not going to make any suggestions in terms of you allowing somebody to become an authorized user on your credit report, unless you’re going to allow them to become an authorized user. And you keep the card right. Now, if it’s your significant other, and you guys have put a good put together, a cash flow control system, then you probably could allow them to use a card because you guys are going to be managing your finances jointly and together. Now, the first thing is, is that you understand the pros and cons. Don’t become an authorized user with someone who doesn’t know how to manage their credit. So I’ve already kind of, I already alluded to this, but I have seen this so many times where people will become an authorized user on someone’s credit report.

Then either a, they don’t have any history or b, their utilization is, is they just don’t understand credit that went out. They got approved for credit when they had the score, but they didn’t really understood what understand, how it worked. And now you’re going, they may even allow you to do it, but if they’re not using it credibly, then you’re, you’re not, it’s not going to help you. So the other thing is you want the account to be at least two years old. So when you’re considering becoming an authorized user, you wanna, you wanna, you want it to be at least 24 months of history because that 24 months is going to be added to your credit file. So remember, I broke down credit age, I would say the bare minimum, when you want to look for is 24 months. If it’s not at least 24 months, I wouldn’t even bother trying to do it because it’s, I mean, you, I, I just wouldn’t do it.

Um, the other thing is, is that ideally if it’s like 8 to 10 years old, then you know, obviously the longer, the, the thing about authorized user accounts is the older the account, the better. So the utilization is important, but again, that credit age, the older, the account, the better, even if it’s a lower limit, it’s the older, now a high limit with old age. That’s like the ideal scenario. So the other thing is you don’t want to have no missed or late payments. So that person doesn’t have to, if they have an account that let’s say is 5 years old, but they have multiple missed or late payments and crazy utilization, there’s no need to become an authorized user on that card. And you would know this because typically when you become an authorized user, you’re going to be going to somebody that, you know, or someone that you’re, you know, you’re close to.

So don’t, don’t go and become an authorized user to have any missed or late payments. Because again, that missed or late payment history is now going to, because it’s going to literally just report the same exact history from their report to yours is going to negatively impact your score. Right. Right. And you want to make sure they have low reporting and utilization. i.e. 0 to 7% reporting utilization. So I think this goes without saying, but they don’t need to have a high utilization. That’s another thing I’ve seen. So somebody will have a credit card for 3000 and they’re using 2,900 and then their authorized user on that. And how the utilization is like at like 90%, right? And now they’re not taking advantage of any of the points available because their score is being dropped because of somebody else’s lack of financial irresponsibility.

Right? So these are some key key things. So when you’re looking at the authorized user report or user account, the older, the account, the better, the higher, the utilization i.e. not even the utilization, the higher, the available credit and the older, the account, the better. So that sweet spot, 10 years old, 8 to 10 years, I would say 5 to 10 years old. But if you can find one that’s 10 years old and they’re there, they have a high limit, 10,000, 15,000 at you, are, you are, you’re a great, a great place to become an authorized user because all of that is going to be added to your file. Okay. So this is all we had on this one, and I will see you in the next video.