Along with a bad credit car loan consumers with bad credit can also realize a boost in their credit score by becoming an authorized user on a credit card although there are some drawbacks to the practice
Back in the game
At Auto Net Financial we believe in working with consumers who have bad credit and helping them raise their FICO scores and reestablish their car credit – a form of credit repair – by filling out our online bad credit car loan application and financing a vehicle through our nationwide network of dealers that specialize in second chance auto loans.
While working with credit-challenged consumers, we have come to believe that one of the keys to successfully reestablishing your credit is an understanding of the credit rebuilding process (including tote the note dealers). For many people emerging from bankruptcy, or just trying to raise their credit scores in any way possible, the idea of repairing their credit quickly and raising their FICO scores through a credit repair agency can be very appealing. And while it won’t help you reestablish your auto credit, one such method is being added as an authorized user on a credit card account.
An authorized user
An authorized user is a person assigned to a credit card account who is someone other than the account holder. Being assigned as a user to a credit card account when the account holder has a high FICO score will also raise the credit score of the authorized user in a couple of ways in a process known as account “piggybacking.”
The first advantage of “piggybacking” on the account of someone who pays like clockwork every month is that this activity will appear on your own credit report and will raise your credit score, as well.
The second advantage of this practice is that the increase in available credit (the maximum amount authorized to the credit card) as well as the increase in your own credit “ceiling” will also raise your credit score.
Credit repair practices
In many cases, companies that specialized in credit rebuilding will solicit credit card account holders that have high credit scores, offering to pay the account holders for the use of their accounts for the purpose of adding authorized users. The company will then assign their clients to these accounts to raise the credit scores of these consumers.
Credit bureaus respond
As this practice became more prevalent, it began to attract the notice of FICO (the credit scoring company) as well as Equifax, Experian, and TransUnion – the three major credit bureaus. The response of FICO was to create a new credit-scoring model, called “FICO 08”, which would ignore authorized user accounts when calculating someone’s credit score.
This plan, however, ran into a major glitch. According to FICO, a number of banks pointed out that the practice of ignoring authorized users would block FICO’s compliance with Federal Reserve Regulation B, which requires lenders to consider shared accounts of spouses when considering a married person’s credit risk. If FICO ignored these relationships, it would’ve run afoul of the rule.
So although FICO says it has discovered a way to restore authorized-user accounts to its formula while, at the same time, reducing the impact of piggybacking, authorized users are still a part of the equation – although possibly not as big a part as in the past.
The drawback of being an authorized user
All is not entirely rosy on the authorized user front, though, even if you do decide to go this route. The fact is, if the account holder continues to pay his or her bill on time, your credit score will continue to reflect this positive activity. If, on the other hand, the account becomes delinquent or goes unpaid, your credit score could also take a serious hit.
As we see it
The bottom line to this discussion is that as a consumer with bad credit, you need to decide for yourself how you want to go about raising your FICO score and if you feel that paying a credit repair company to add you as an authorized user to an account is worth the cost.
At Auto Net Financial we have helped thousands of people with bad, blemished, bruised and tarnished credit buy cars and reestablish their credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. Out web site will help you determine how much car you can afford and unlike many other companies, our toll free number is listed on our site in case you have any additional questions. When you decide to buy a car, our online bad credit car loan application can be filled out in the comfort and security of your own home.
For more information, visit www.autonetfinancial.com to see what we can do for you.
