Angie was 22 and fresh out of college when a routine credit check revealed she was carrying a $40,000 balance on a credit card she barely used. Back when she was 16, her mom had added her as an authorized user on the card. Since then, she'd charged about $6,000 to it — mostly for gas, mostly under $50 at a time.
The other $34,000 belonged to her mom. And none of it had been paid down.
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When she gave her the card, Angie's mom said it was supposed to help build her credit. Instead, the unpaid balance has trashed the score she was counting on to rent her first apartment.
So how does being added to a parent's account turn into tens of thousands of dollars of debt you never agreed to — and once it happens, what can actually be done?
How authorized credit cards work
Many teens or young adults don't understand what being an authorized user on a credit card actually means when their parents hand them a credit card. The kid might think this is their credit card. Or, they may know they're an authorized user, but don't fully grasp what that means. (Heck, the parents may not fully understand, either.)
Angie's mom originally decided to add her as an authorized user on their credit card because it was simpler than giving her gas money all the time. And they figured since her name and credit profile were attached to the card, it'd give her a headstart on building a credit record.
However, parents should know that plan only works if the card issuer actually reports authorized-user activity to the credit bureaus — federal law doesn't require it. Some issuers report it by default; others only do it under certain conditions, or not at all. Anyone adding a child to a card specifically to build their credit should ask the issuer directly whether — and to which bureaus — authorized-user activity gets reported, since a card that doesn't report won't help (or harm) anyone's score but the primary holder's.
Assuming the card issuer does report an authorized user's activity to the credit bureaus, how would Angie have built credit? Ideally, her mom would have been making regular payments on the card. Payment history comprises 35% of your FICO score. Credit age accounts for another 15%, so since she'd already had the credit card for six years at that point, Angie's credit score should have been solid.
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