Credit Question
Q: My sister recently got me an American Express Card with my name on it, which is associated with her account, without telling me. Does this or will this have any impact on my credit score? She pays all her bills on time, but I don’t like having anything in my name. I am in possession of the card but still, I have perfect credit, mortgage, car lease, etc, and don’t want to add additional credit cards if it will impact my score (I have my own Am ex as well). Can you possibly advise on this?
A: The account could help or hurt you depending on certain factors. First I am assuming it is an “Authorized User account (AU)”? You should ask her if it is a joint account or AU account. If she has excellent long term credit with Amex and keeps her balances well below the limit it could help your credit scores. If the opposite has occurred it could hurt you. Seeing your credit report and knowing the age and payment history of your sisters account would help me give you more detailed info. If you would like to order your Fico scores go to www.myfico.com and buy your Trans Union and Equifax credit scores. Once you get them send me a copy and I will evaluate them.
Here is a definition of a joint and authorized user account:
Authorized user accounts is when a second individual is placed on a primary cardholder’s credit card for the sole purpose of being allowed to charge on the account. The user can use your card freely and make changes to your account but will not have the responsibility to pay monthly payments and fees. Most authorized users are not responsible for the payments but will see the payment pattern on their credit profile. This account and its history will be added to the authorized users credit within 3-6 months. If the authorized user is taken off the credit card, the history, in most cases, can be removed as well. These accounts can dramatically increase or decrease the credit, depending on various factors. The problem with authorized credit is it cannot be used as a valid credit line when a bank is deciding if they will approve a loan. Most mortgage banks will not approve a loan if the consumer does not have a certain number of accounts of their own but has many authorized user accounts.
A joint account is when two individuals are equally responsible for credit card payment patterns and debt. When having joint accounts, the two applicants have a legal obligation to whatever debt is on the credit card. Each credit card user can use the card, and whatever paying patterns occur will affect both of their credit profiles equally. If one defaults on the debt owed, the other is still responsible. This can be a problem if one person loses their job and late payments occur; it will ruin both cardholders’ credit. If credit is kept separate and one person loses a job, at least the other person’s credit can be saved. The couple can decide which individual’s credit will be sacrificed and left unpaid until finances change. This can help in refinancing situations.
Leave your credit questions here or email me at tracy@northshoreadvisory.com. Feel free to visit our website, www.northshoreadvisory.com and find out more information.
