Wednesday, December 17, 2008

Becoming An Authorized User Still Works

As I previously wrote about, one of the quickest ways to raise your credit score, and get into the credit card 'market', is to become an Authorized User on someone else's card. This means that you ask someone who has a good credit score to add you to a card that has a high credit limit and no debt. They have to add your Social Security number to their account. This card will be reported to your credit report. Then... you'll watch your score rise!

The new method of calculating your credit score, FICO 08, was going to make this obsolete. Many people would see their score drop, and it would be harder for people who have never had a credit card to get their first card.

I waited for people that used this strategy to suddenly see a drastic drop in their credit scores. But it never happened. Scores stayed high. I hadn't seen official word from FICO about it until now. I just came across this PDF of the testimony from someone from the Fair Isaac Corporation (FICO), that being an authorized user on someone's account will continue to help your credit score.

He says that there will be some changes, and becoming an Authorized User might not be as beneficial as it used to be, but bottom line, if you are looking to get your first credit card, it is still a good idea to get added on to someone's account. I don't know how much longer this will work though, so take advantage of it by building your own credit quickly.

Why does Authorized User work?
It seems that the Credit Reporting Agencies don't 'know' if you are actually related to the person who added you as an Authorized User. This is why it helps to be an Authorized User, as they think you are a spouse or otherwise closely related, and responsible for the credit as well. You can become an Authorized User on a friend's account, even if you are not related, and it will still help raise your score. It is totally legal to get added on as an Authorized User. Although, your 'intention' should be to have access to the credit line, not to fool the credit card companies.

Read Part Three of the Credit Education Series to fully understand this concept.

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