Home > Credit Score > Some Debt Expert Advice You Probably Shouldn’t Follow

Comments 0 Comments

The Credit.com Forum recently saw this post about how credit scores consider authorized users on credit cards: Is Dave Ramsey right about authorized users?

“I saw that this was published through several sources within the last week. I thought being an authorized user could at times be beneficial to the authorized user….”

Nationally known author, radio host, and advocate for people getting out of debt, Dave Ramsey recently posted the transcript of a call from his radio show, Authorized Users Don’t Help Your Credit, citing his 60 employees using his debit card as an example of how being an authorized user on a card won’t affect your credit.

While Dave does a great job of helping people get and stay out of debt, his answer to the caller about how authorized user accounts may or may not impact credit scores unfortunately missed the mark, particularly where FICO credit scores — the ones used in most lending decisions — are concerned.

First, what’s an authorized user? This is someone who has been given permission to use a credit card by the primary cardholder. In most cases, authorized users are not contractually responsible for the charges — even their own — and are typically spouses and other family members, although they can also be significant others, friends, or just about anyone.

What Dave doesn’t seem to be aware of is that an authorized user will see that account on her credit report, along with all of her other credit information, and that the account will, in most cases, be included in her FICO credit score.

In response to Dave’s caller, the answer I would have given would have been that her brother could boost or hurt his score by being added to her account, depending on the status of her account and his overall credit standing.

For instance, if she has had the account for many years without any late payments, and has kept the balance low, his score could improve after being added. However, if she has any recent late payments or high credit utilization (balance/limit ratio) on the account, her brother’s score could actually drop after he’s been added as an authorized user if his credit report shows, for example, no recent late payments, or if he has cards with lower credit utilization than his sister’s account.

Where Dave is right on the money, though, is in his advice that the caller should be careful not to let her brother do “stupid things” with the card. If he does, she’s on the hook for his charges, and will probably be stuck with a lower credit score. For these reasons, if she does add him as an authorized user, she should not give him a card. This way his score can benefit while she maintains full control over the account.

But what about Dave’s 60 employees whose scores are not affected by being authorized users on his debit card? Simple. Unlike credit cards, debit card accounts don’t appear on credit reports. And if an account isn’t on your credit report, it’s not in your credit score.

[Credit Cards: Research and compare credit cards at Credit.com.]

Image: Laughlin Elkind, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team