This post originally appeared July 14, 2016 on CreditCards.com as “Authorized user doesn’t like the piggyback ride”
By Barry Paperno
Dear Speaking of Credit,
I was recently added to my fiance’s accounts as an authorized user to try to help him clear up some fraud. He had a few late payments in the past and now those are showing on my credit report. Is that legal? Can I dispute this since the late payments happened long before I became an authorized user? – Amy
Dear Amy,
Not only is it legal to report account history that predates you becoming an authorized user, it’s based on a legal requirement.
The practice was put into place to help protect your rights under the Equal Credit Opportunity Act (ECOA) of 1974. This law forbids discrimination against an applicant on the basis of race, color, religion, national origin, sex, marital status or age. The Federal Reserve’s Regulation B, which implements the ECOA, requires that information on “spousal” authorized user accounts be reported to the credit bureaus and considered when lenders evaluate credit history.
While Regulation B places this requirement only when the authorized user is a spouse, lenders have no reliable way to know someone’s current marital status. That has led lenders to simply report all authorized user accounts to the credit bureaus for inclusion in the authorized user’s credit report − spousal relationship or not.
So that’s why his late payments are showing up on your credit. It’s legal, although the all-inclusive way authorized user accounts are reported has led to some unintended consequences. Most notably, the authorized user system has become a credit repair strategy for consumers with bad or no prior credit. In a tactic known as “piggybacking,” authorized users are added to card accounts for the sole purpose of including an established account with a positive credit history to an otherwise less-than-stellar credit report. As soon as the good-credit data appears on the authorized user’s credit report, the good-credit juice starts flowing, helping build or rebuild the authorized user’s credit score.
Authorized users enjoy the best of both credit worlds. In good times, they can take advantage of the positive history associated with a paid-on-time and low-balance account without the legal responsibility to make payments. Or, in bad times, by not being liable for the balance, the name of the authorized user can be removed from the account and that trade line (account) deleted from her credit report, no questions asked.
In reply to your question of whether you can dispute those older late payments because they occurred before you became an authorized user, the short answer is no. If the reporting of any delinquency is not accurate — for example, if it wasn’t late — your fiance can dispute it with the card issuer and credit bureau. Then, if corrections are made, they will appear on your credit report as well as his.
But, if rather than questioning the accuracy of those delinquencies you simply don’t want those late payments on your credit report, you can easily eliminate this account – payments and all – forever from your reports at your request. That is, as long as you’re willing to end the authorized user relationship on that card. To do so, simply:
- Notify the card company that you no longer wish to be an authorized user, and
- Monitor your credit report to make sure the information is removed. Card issuers report monthly to credit bureaus, so it may take a full billing cycle for the information to get into the credit bureau’s hands and be processed. If it remains longer than a month, dispute the account with the credit bureaus, using the reason that it is “not mine,” to remove all traces of the card’s history from your credit report.
How piggybackers can evaluate their credit ride
I advise you to think twice before you remove the account from your credit report, and thus your credit score. If you stop piggybacking, you will eliminate an established account’s entire credit history from your credit report. That runs the risk of discarding more good credit than bad.
Credit is made of several components. Some parts might be lifting your credit, while others drag. You want to try to figure out the net effect.
Yes, his late payments are a drag on your credit, but that drag might be overcome by the lift provided by other parts of his credit. If the strongest parts of his credit help cancel out the biggest weaknesses in yours, you might want to stay on as an authorized user.
So look at each important part:
- Payment history: Late payments are always to be avoided, since payment history is the most influential scoring category, accounting for 35 percent of the score. However, since it has been a few years since they happened, the damage they caused has been diminished.
- Credit utilization: Low utilization (balance/limit percentage) can be brought on by a low card balance, high credit limit or both. If the utilization on this card is low or lower than any other cards on your credit report, it could be helping you in this category, which accounts for almost 30 percent of your score.
- Length of credit history, as measured by the number of months since the card’s open date. If this is the one of the oldest accounts of any kind on your credit report, it could be contributing positively to your length of credit history, a scoring category that makes up about 15 percent of your score.
- Types of credit: This scoring category considers the range of your credit experience and is worth about 10 percent of your score. If this is the only card on a credit report that previously contained only student and auto loans, you may have already added a few points to your score by expanding the types of credit you use.
And don’t forget, if you do absolutely nothing, those late payments will fall off your credit report automatically after they are 7 years old. By then, the absence of late payments, combined with the card’s increased length of credit history and, hopefully, its low utilization, will be adding even more points your score.
Speaking of Credit 
Hi Barry, I recently got added to my girl friend’s card as an authorized user. The account was opened 20 years ago, so I get all the good payment history added to my credit profile.
The report reflects this account, but my oldest account as per FICO Score Model 8 still shows as 4 year old. Does the model not consider the card if I am an authorized user?
Cheers
Sam
Good one, Sam! Not sure if you’re aware, but FICO 8 and 9 tend to give less weight to authorized user accounts for some consumers. This is FICO’s attempt to thwart abusive piggybackers.
So, it could just be that the score is not weighing your authorized user accounts as much as your own accounts within the Length of Credit History-related calculation that measures the age of your oldest account. And there may be other areas of the score not giving authorized user information the same degree of influence. But I have my doubts this is why you’re seeing that four-year-old account as your oldest.
If I had to guess, I’d bet there is a disconnect of sorts between the scoring formula itself, the score explanation software that’s telling you the age of the oldest account, and perhaps even the credit report shown. Sites providing scores along with reports and explanations lead you to believe that the scoring formula scored the report you’re seeing and is responsible for the explanation details. Don’t believe it!
The FICO scoring software only returns the score and the 4-5 score factors (aka reason codes) that accompany any score you get from anywhere. And these score factors don’t specify numbers of months, dollars, accounts, etc. A typical score factor says you have too many of this or not enough of that, but not, for example, the age of the oldest/youngest account or the number of credit cards on your report.
Believe it or not, the scoring explanation software is not tied to the actual scoring formula. Instead it’s triggered by the score factors, such that if one says you have “insufficient length of credit history,” the explanation software may go looking for the oldest account on the report and display its age. This doesn’t necessarily mean, however, that the scoring formula that delivered this score considered that account to be your oldest. Nor is the report your seeing necessarily the same as the report used to calculate the score.
Sounds farfetched, I know. But during my time at myFICO I saw many discrepancies of this sort.
Could you share with us where you obtained that FICO 8 score, report and explanation? And what bureau was used? Hopefully, we can figure this out!
Thanks Barry for such a detailed response. The three FICO 8 scores are from http://www.freecreditreport.com ( a service by Experian). I signed up for the service where they provide three FICO V8 scores and three credit reports, the details are refreshed daily upon login. I think the explanation is from Score Tracker (that tracks changes in your FICO® Score and credit rating, based on your Experian Credit Report)
The factor that is negatively impacting score on all 3 bureaus is “Short credit history”
Apart from this, Transunion has “Installment balances” & Equifax has “Credit card balances”.
I find it interesting that there are different -ve factors even though all three reports capture all the accounts and balances accurately ( same level of debt, no. of accounts etc)
I’ll take your word for it that FreeCreditReport.com is providing actual FICO scores. I couldn’t find where it says so on the website.
The only thing I can think of is that Score Tracker may be excluding authorized user accounts in its explanations. It’s also interesting that the score factors vary so widely from bureau to bureau. Though there’s never any way to know absolutely for sure about these things, it’s helpful to know that each bureau’s FICO score is developed separately from each other using that bureau’s data to maximize it’s ability to predict future risk. Also, of course, credit reports can change frequently and with them your scores. Still, the way those factors are so different from each other has me wondering what’s up.
If you don’t mind me asking, how are your scores? Good?
Thanks again Barry for the response.
The site shows “FICO® Score 8 powered by Experian”, “FICO® Score 8 powered by Equifax” and “FICO® Score 8 powered by TransUnion” next to the scores, so I assume they are real FICO score. Even though the site name has “free” in it, I had to pay for this service, they don’t give these scores for free.
Here are my score as of 7/22:
Experian : 765
TransUnion: 746
Equifax: 730
Utilization at 3 agencies is 7%
Mix of credit cards, store cards and installment accounts
Inquiries :
Experian : 29
TransUnion: 26
Equifax: 15
Length of history ( this includes authorized user):
Oldest : 21.6 years
Average:
Experian : 2.3 yrs
TransUnion: 2.3 yrs
Equifax: 2.5 yrs
Factors helping:
—————————
Experian:
No missed payments
Low credit usage
Recent credit card use
No collection or PR
TransUnion:
No missed payments
Recent credit card use
No collection or PR
Equifax:
No missed payments
Low credit usage
Recent credit card use
Factors Hurting:
—————————
Experian:
Short credit history
TransUnion:
Short credit history
Installment balances
Equifax:
Short credit history
Credit card balance
Hopefully that gives a better picture of where I stand. Have a good day!
Actually one more piece of info that might matter:
Employers:
————————
Experian : lists 2 firms
TransUnion: list 1 firm
Equifax: lists zero firms
Transuion has PAYLEASE ( rental details) for couple of months. The other two don’t have it.
No negative info like collections or delinquencies etc.
Your excellent scores are probably the reason why those factors are so different from one bureau’s FICO score to the next. The “hurting” factors listed have less meaning the higher your scores go.
That is, when your payment history is perfect and utilization is ideally low, about two thirds of your score is accounted for right there. The factors then that you didn’t score as high as you could have tend to be the low-weight ones that you have little control over anyway, e.g. length of credit history, mix of credit. And the scoring formula and report differences across the bureaus mentioned in my last reply are the reasons the hurting ones listed are so varied. That remaining third of the score tends to be where the mix of factors used in the different scores vary the most.
Actually, if all of those inquiries are hard ones I’m surprised “too many inquiries” isn’t your top negative score factor. Do those numbers include the soft ones?
Going forward, other than continuing what you’ve been doing with your credit, the only thing I would suggest is helping your length of credit history by not opening any new cards or other accounts — or keep new openings to a bare minimum — for as long as possible.
Actually, almost all inquiries are hard inquiries as I applied for too many credit cards under the impression that more accounts mean higher score ( which was not exactly the case)
In the last one year, I only have like 2 inquiries ( one for 5 year secured loan to boost score) and another for 21 month 0% APR card to smoothen my cash flows as I try to buy a house in my home country in Asia.
By end of Apr 2018,
1. I will be left with 2 inquiries on Equifax, 1 inquiries on TransUnion, 1 inquiry on Experian
2. I should be within 3% utilization
3. Avg age of accounts will be 6 years
4. Zero late or missed payments ( hopefully )
That is my strategic to get to 800+ score. 🙂
So, the inquiries aren’t hurting your score because all but a few are more than a year old. While inquiries appear on your credit report for two years, the scores only look at them for the first year.
Your strategy is good, with your biggest hurdle going forward being a short length of credit history. If you’re to get anywhere close to 800 by April 2018, it will be essential to stop applying for credit of any kind between now and then.
New accounts are now your enemy, as every new account can be expected to lower your average account age, which at 6 years, is already quite low.