Dear Liz: You’ve written about helping teenagers get started with credit. One of your suggestions to parents is to consider adding the youngster to one of their credit cards as an authorized user. I agree with the spirit of the suggestion (that it will help the parent monitor any irresponsible spending), but I think in practice that can be dangerous to the kid.
At 16, my then-stepmother added me as an authorized user on her credit card “for emergencies.” I never used the card without permission, and I learned that credit cards are not free money. When I was in college, she and my father divorced, and we lost touch. I haven’t used that account in more than four years. Last fall I applied for a new credit card to use for business expenses and was rejected. I checked my credit report, and lo and behold, the account I am an authorized user on is now in serious straits.
Apparently after the divorce, my former stepmom had some financial trouble and eventually ran up that card to its limit, then filed for bankruptcy in 2010, leaving a glaring (and, according to the bank, immutable because the account is closed) spot on my credit. I have very little else as credit history, which makes this an even larger problem. My fiance and I are planning on buying a home in the next few years, and we’ll probably have to leave my name off to avoid serious increases in interest or even face being turned down for a mortgage.
In uncertain financial times even for the responsible, parents who add their children to their accounts need to know they are signing up to pass on all of their credit history, good and bad, to their children. Sometimes that’s more of a burden than a blessing.
Answer: Your experience shows the real potential downside for anyone who is added as the authorized user of a credit card. But you shouldn’t accept the bank’s initial response as final.
You can be removed from this account if the bank is willing to do so. Take your case to the bank’s chief executive. You can find his name and the bank’s corporate address on the bank’s website (check its regulatory filings under “investor relations” if the bank doesn’t make the information obvious).
Your experience also shows the importance of checking your credit reports at least once a year, since you could have spotted the problem and asked your former stepmother to remove your name from the card long ago. Also, it’s important to build credit in your own name rather than continue to rely on the record of someone else.