Making Sense of Authorized Users

An authorized user is someone other than the account holder who can be added to a credit card account in a legal practice called “piggybacking.” 

 

If you have poor credit, having yourself added as an authorized user to the account of someone with a high credit score, low account balance and high credit limit, can improve your credit scores in a couple of ways. To begin with, the positive credit activity will begin appearing on your credit reports, making a positive impact on your FICO scores.Additionally, the new credit line will increase your available credit and, at the same time, lower your debt ratio which can further improve your credit scores.

Credit bureau reaction

This practice attracted the attention of FICO as well as the three credit bureaus and resulted in the “FICO 08″ scoring model which was designed to ignore authorized user accounts when calculating credit scores. But FICO 08 also caused a problem. According to FICO, the government informed them that ignoring authorized users would obstruct FICO’s compliance with the Equal Credit Opportunity Act, Regulation B – a rule that requires lenders to consider shared accounts of spouses when determining a married person’s credit risk. By ignoring these accounts, FICO 08 would be in violation of Regulation B.

According to FICO, it has since adjusted the formula of FICO 08 to include authorized users while reducing the impact of piggybacking. This means that as it now stands, authorized users continue to be included in FICO’s formula.

Piggybacking issues

If, for some reason, the account holder is either late or misses one or more payments, the credit scores of the authorized user will also be affected.