Want to know more about authorized credit card users and how they can affect your credit? Click here. [Duration – 2:30].
It can be tricky to build credit when you have little to no experience using credit. One popular strategy to establish credit history is to become an authorized user on another persons credit card account.
Your credit report contains sensitive personal and financial information, so it’s understandable to wonder who can access it. The Fair Credit Reporting Act (FCRA) regulates who can view your credit report, under what’s known as “permissible purpose.”
What is Permissible Purpose?
Permissible purpose allows certain companies and employers to access your credit report to make decisions about granting you credit, insurance, employment, housing, and other services
Entities that may access your credit report under permissible purpose include
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Lenders and creditors you are applying to for credit or loans. They want to determine your creditworthiness.
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Existing creditors and lenders you already have accounts with. They might want to look at your report before deciding whether to raise your credit limit or make other changes to your account.
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Insurance companies, to underwrite new policies or adjust rates on existing policies. They use your credit history to assess risk.
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Renters or property managers, to decide if they want to rent to you They might check to see if you’ve always paid your bills on time.
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Certain employers and prospective employers, but only with your written authorization. They may want to evaluate your financial responsibility.
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Child support enforcement agencies, to locate individuals who owe child support.
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Government agencies such as regulatory bodies and law enforcement.
The three major credit bureaus (Equifax, Experian, and TransUnion) are required to keep a record of every entity that accesses your report. You can view these inquiries on your credit reports.
How Creditors and Lenders Use Your Credit Report
When you apply for credit like a credit card or loan, the lender will likely check your credit report from one or more bureaus. They want to determine your creditworthiness – specifically, your likelihood of repaying the debt.
Factors lenders consider include:
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Payment history: Have you paid your past credit accounts on time? If you haven’t, that could mean you’re a higher risk.
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Amounts owed – How much do you currently owe on all accounts relative to your credit limits? Higher balances suggest higher risk.
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Length of credit history: How long have you been managing credit accounts? A longer history means you’re less likely to default.
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New credit – Have you opened many new accounts recently? Too many new accounts can indicate higher risk.
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Credit mix – Do you have experience managing different types of credit like revolving (credit cards) and installment (loans)? Broader mix often suggests lower risk.
Based on these and other factors, the lender will decide whether to approve your application and what rates and terms to offer. Maintaining a strong credit history leads to better offers.
How Insurance Companies Use Your Credit Report
Insurance providers may check your credit when you apply for new coverage and at renewal time for existing policies. They use your history to assess risk levels and set premiums accordingly.
Policy types that commonly involve credit checks include auto, home, renters, life, and health insurance. Specific factors insurers consider are similar to lenders:
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Payment history – On-time payments suggest lower risk, while late payments indicate higher risk.
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Outstanding debt – Higher debt loads may correlate to higher risk.
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Length of credit history – More established history indicates lower risk.
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New credit – Applying for a lot of new credit can signal greater risk.
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Credit inquiries – Numerous recent inquiries could mean you’re shopping for insurance due to claim filings.
In most states, insurers can use your credit information to deny coverage, charge higher premiums, or attach exclusions. Maintaining good credit lowers insurance costs.
How Landlords Use Your Credit Report
Most landlords and property managers check applicant credit reports to help select responsible, reliable tenants. They want to avoid renting to high-risk individuals who may damage property or fail to pay rent.
Specific credit factors landlords weigh include:
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Payment history – On-time payments suggest you’ll pay rent reliably. Late payments indicate higher risk.
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Balances owed – High balances relative to credit limits can equate to higher risk.
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Collections – Unpaid past-due debts suggest higher risk.
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Credit history length – Longer history indicates lower risk.
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Recent inquiries – Numerous recent credit applications may signal financial issues.
With a strong credit background, you’re more likely to be approved and may avoid paying additional deposits. Poor credit may result in denial or extra fees.
How Employers Use Your Credit Report
While less common than in the past, some employers still perform credit checks on job applicants and existing employees. Positions where credit checks are more likely include ones with financial responsibility or security clearances.
Employers must have your written consent to access your credit reports. And they must disclose plans to use the information before getting your authorization.
Aspects employers may consider include:
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Late payments – Could suggest irresponsibility and unreliability.
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High balances – Might indicate excessive spending and financial distress.
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Short credit history – Little track record could equate to higher risk.
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Recent disputes – May signal financial troubles.
While credit reports provide insight into applicant responsibility, their predictive value has been questioned. Some locations have limited employer credit checks.
Who Cannot Access Your Credit Report
While the FCRA allows many entities to access your credit report, some are prohibited under the law, including:
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Individuals or companies without a legitimate business need – They cannot access your report out of curiosity or concern.
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Most government benefit programs – Agencies administering assistance programs cannot pull your credit report.
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Law enforcement lacking a court order or subpoena – Investigators typically must present required documentation.
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Debt settlement companies – They cannot pull your report solely to market their services to you.
Outside of specific permissible purposes, companies should not access your credit information without your consent. Misuse can be reported to regulators and credit bureaus.
How to add or become an authorized user
Authorized users are often related to the primary cardholder. They might be a child, another family member or even a close friend. However, anybody can become an authorized user if they meet the card issuers age requirements and the primary cardholder approves the addition.
If youre interested in becoming an authorized user, speak with a trusted friend or relative about the process. Once youve reached an agreement, the primary cardholder must authorize the credit card company to add you to their account. They can do so via telephone with the card issuer, or online through the banks mobile app or website. There may be a fee for adding an authorized user, depending on the credit card provider.
Once approved, you will have the option of having a new credit card issued in your name. Keep in mind that you are not required to request or receive a credit card as an authorized user. Simply being on the account — provided you exhibit responsible credit behavior — can positively impact your credit history.
What is an authorized user?
An authorized user is someone whos been added to a credit card account by the cards owner, also known as the primary cardholder. The authorized user can make purchases with the credit card as if it were their own. However, the responsibility to pay any charges remains with the primary cardholder.
Credit Report Authorization Form EXPLAINED
FAQ
Who has authorization to use your credit report?
Insurance companies, employers, and landlords can also request to access your credit report.Aug 1, 2023
Does a credit report show an authorized user?
Quick Answer. Many major credit card issuers report authorized-user accounts to all three credit bureaus. These accounts might help you establish and improve your credit scores, but the impact could depend on exactly what’s reported and the entirety of your credit file.
Which companies report authorized users to credit bureaus?
What’s the minimum age to be an authorized user?Credit card issuerDoes the issuer report the authorized user’s credit activity to the credit bureaus?Minimum age for authorized usersCapital OneYesNoneChaseYes, if the user is 18+ years oldNoneDiscoverYes15 years oldU. S. BankYes13 years old.
Does TransUnion report authorized users?
A card issuer must report the authorized user account to the three nationwide consumer reporting agencies (Equifax, TransUnion and Experian) in order for it to appear on your credit report. If the card issuer does not report the activity, being an authorized user will have no effect on your credit.