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6 months ago
Sun Mar 17, 2024 9:48 pm
Rowdy_Dodger
Seasoned Rebel
I’ve been meaning to share what I know about Authorized User (AU) cards for some time. Now is as good a time as any, and this is as good a place as any to share it.
What makes a good AU card? When someone uses the term “well-chosen AU card”, what do they mean? Are some cards better than others? Are they talking about a high credit limit? Or a long-opened CC account? Does utilization matter? Are some credit card companies simply better at it than others? Well, I’m here to tell you…the answers to those questions are pretty clear.
If it matters to the reader, I’ve been creating AU cards for family and friends for more than 20 years. I personally believe AU cards can be quite valuable for someone just starting out on their credit journey, and for those with damaged credit as well. To put it bluntly, there’s a reason people pay companies $300-1000 a month for AU cards: it’s because they can change a credit score for the better within weeks. I’m not saying an 18 year old kid with a 780 fico 8 due to AU cards is going to qualify for an auto loan, but a high fico score has measurable benefits: lower interest rates, increased credit approval odds, and a foot in the door. Those things have value.
Rather than drag it out any longer…here’s what makes a good AU card:
For maximum fico 8 scores, the card must have been opened for more than 1 year. That’s all it takes. One year. One year or 10 years? It doesn’t matter. One year or one month? It matters. I know this flies in the face of conventional wisdom, but I’ve tested it. Recently. It literally doesn’t matter at all as long as the card has been opened for at least a year. Less than a year and you’re probably going to see a penalty. Presumably the AoYRA<12 months penalty.
For maximum fico 8 scores, the AU card credit limit does not matter. For example, whether the AU card credit limit is $2500 or more than 20 times that amount, a person with nothing in their credit reports could expect to see a fico 8 of around 750 when the AU card lands. Assuming the next detail is met:
For maximum EX fico 8 scores, the overall utilization has to be under 6% (what Experian calls “Elite” status). If an individual only has one account in their credit reports (an AU card, in this case) the AU card must report less than 6% utilization to see maximum EX fico scores. If the individual has more than one revolving account, then they’re going to have to do a little math. Because neither MyFico nor Experian correctly calculate utilization in their front end when AU cards are involved. The important thing here is to do the math, because the actual fico algorithms do correctly calculate utilization when AU cards are involved.
My last point is subjective, but may be useful to some. The question of “who does AU cards right?”. In my personal opinion, the answer is Capital One. Head and shoulders above the rest. “Account managers” (AU with perks) can see their charges online, add the AU account to their app, pay their portion of the charges (or the whole balance if you wish) and the experience is seemless. No one else approaches it. My second choice would be Discover, but they’re playing for silver. I’d be remiss without pointing out that Chase has one benefit that Capital One lacks (the ability to create an AU without inputting the authorized user’s SSN) but Chase AU cards are hit or miss. Sometimes they don’t “take” - the card is simply never created. And sometimes they take, but never land on the authorized user’s credit reports. A problem exacerbated by not including a SSN. Lastly, I should point out that some credit card companies don’t export the card’s entire credit history to the credit bureaus. Amex, for example. Personally, I don’t see this as a big problem for people with strong credit profiles, but it’s something to be aware of for those new to credit or needing the biggest scoring boost possible in the shortest time. If it weren’t for this lack of AU credit card history, I’d consider Amex as my second choice behind Cap One.
If this post generates interest, I’ll share the results of all the score changes I’ve recorded due to AU cards. Some had no credit, others average to good credit, and some had poor credit. If you have any questions, just ask.
What makes a good AU card? When someone uses the term “well-chosen AU card”, what do they mean? Are some cards better than others? Are they talking about a high credit limit? Or a long-opened CC account? Does utilization matter? Are some credit card companies simply better at it than others? Well, I’m here to tell you…the answers to those questions are pretty clear.
If it matters to the reader, I’ve been creating AU cards for family and friends for more than 20 years. I personally believe AU cards can be quite valuable for someone just starting out on their credit journey, and for those with damaged credit as well. To put it bluntly, there’s a reason people pay companies $300-1000 a month for AU cards: it’s because they can change a credit score for the better within weeks. I’m not saying an 18 year old kid with a 780 fico 8 due to AU cards is going to qualify for an auto loan, but a high fico score has measurable benefits: lower interest rates, increased credit approval odds, and a foot in the door. Those things have value.
Rather than drag it out any longer…here’s what makes a good AU card:
For maximum fico 8 scores, the card must have been opened for more than 1 year. That’s all it takes. One year. One year or 10 years? It doesn’t matter. One year or one month? It matters. I know this flies in the face of conventional wisdom, but I’ve tested it. Recently. It literally doesn’t matter at all as long as the card has been opened for at least a year. Less than a year and you’re probably going to see a penalty. Presumably the AoYRA<12 months penalty.
For maximum fico 8 scores, the AU card credit limit does not matter. For example, whether the AU card credit limit is $2500 or more than 20 times that amount, a person with nothing in their credit reports could expect to see a fico 8 of around 750 when the AU card lands. Assuming the next detail is met:
For maximum EX fico 8 scores, the overall utilization has to be under 6% (what Experian calls “Elite” status). If an individual only has one account in their credit reports (an AU card, in this case) the AU card must report less than 6% utilization to see maximum EX fico scores. If the individual has more than one revolving account, then they’re going to have to do a little math. Because neither MyFico nor Experian correctly calculate utilization in their front end when AU cards are involved. The important thing here is to do the math, because the actual fico algorithms do correctly calculate utilization when AU cards are involved.
My last point is subjective, but may be useful to some. The question of “who does AU cards right?”. In my personal opinion, the answer is Capital One. Head and shoulders above the rest. “Account managers” (AU with perks) can see their charges online, add the AU account to their app, pay their portion of the charges (or the whole balance if you wish) and the experience is seemless. No one else approaches it. My second choice would be Discover, but they’re playing for silver. I’d be remiss without pointing out that Chase has one benefit that Capital One lacks (the ability to create an AU without inputting the authorized user’s SSN) but Chase AU cards are hit or miss. Sometimes they don’t “take” - the card is simply never created. And sometimes they take, but never land on the authorized user’s credit reports. A problem exacerbated by not including a SSN. Lastly, I should point out that some credit card companies don’t export the card’s entire credit history to the credit bureaus. Amex, for example. Personally, I don’t see this as a big problem for people with strong credit profiles, but it’s something to be aware of for those new to credit or needing the biggest scoring boost possible in the shortest time. If it weren’t for this lack of AU credit card history, I’d consider Amex as my second choice behind Cap One.
If this post generates interest, I’ll share the results of all the score changes I’ve recorded due to AU cards. Some had no credit, others average to good credit, and some had poor credit. If you have any questions, just ask.