On February 18 2020, the Facebook page “Real Badass Moms” shared a screenshot of the following tweet, which advised people “with a credit card and a kid” to add their child as an authorized user on that card — an act that would purportedly grant the child a credit score of 800 when they turned 18 (provided that payments were timely):
If you have a credit card and a kid. Add your kid on as an authorized user and pay the bill on time. By the time that kid hits 18. Boom 800+ credit score for them to succeed in this world.
Schools ain't teaching this. It's up to us.
— ❤️💕NETTE ODIE🙌🏿🐐💝 (@nette_odie) February 15, 2020
It read in full:
If you have a credit card and a kid. Add your kid on as an authorized user and pay the bill on time. By the time that kid hits 18. Boom 800+ credit score for them to succeed in this world. Schools ain’t teaching this. It’s up to us.Adulting 101 | These Credit Card Misconceptions Are Robbing YouAdulting 101 | These Credit Card Mi...
The post on “Real Badass Moms” was shared more than 75,000 times in just over a week; @mama_thickmadam’s tweet was liked nearly 200,000 times and shared nearly 50,000 times.
Clearly, readers liked what sounded like a good idea on paper, particularly parents of children entering into a difficult financial climate in 2020. But some of the top response tweets disputed the tweet’s advice. Some users posited that should the parent themselves encounter financial difficulties (many of which, such as car accidents or medical expenses) are unexpected, the child might be worse off in general or turn 18 with a “tanked” credit score:
“Imagine something terrible happens and your child is 18 with a pre-tanked credit score because their parents thought they’d help. Be rich or dont do this. Schools do teach stuff like this, your school just didn’t. Mandatory personal finance class in my high school in nowhere[.]”
“And also don’t have any expensive emergencies, don’t become disabled and unable to work, etc etc. People get bad credit lots of ways, unforeseeable ways. I can see maybe putting your kid on your credit card for a few months before they turn 18 but that’s enough.”
“It doesn’t help as well as you think. I had 780 coming out of college and was denied for credit cards because of “no credit history”. It’s a high score but it’s basically a fake score according to credit agencies.”
“It’s a good place to start but the score alone isn’t enough to have good credit. I’ve worked in a financial institution for some time and have seen plenty of people with authorized user trades on the credit file with a good score get declined. It doesn’t show experience at all.”
“It can help. But as an underwriter I wouldn’t lend an 18 year old any funds even if the credit score was 800. Bc there is no true payment history. Got to have more than a good score. But yes. Parents need to teach these things early ❤️❤️”
If that claim was accurate, the ratio of risk (that a parent’s score could drop through no fault of their own, affecting the child) seemed possibly higher than the reward (a child starting adult life with a 780 or 800 credit score). Others said that they did add a child as an authorized user (or were added by parents), and consequently obtained or transferred a high credit score:
“this is how my credit was built and i didn’t know it until i checked it one day for no reason and i had a 750 lol i don’t even use my credit, but it’s nice knowing it’s there”
“my mommy did this for me and i’m not finna brag but i have an amex, venture card, perf credit score (u still gotta pull ur own weight tho bc even if u have an 800 u might not get approved for stuff bc of ur age), and hella flyer miles to go anywhere”
Finally, at least one commenter claimed that being added as an authorized user on another person’s card was a factor in boosting their score from 550 to 796 in under a year:
I fucked up my own credit long ago. Jus fixed all my negative remarks about a year ago. Had my OG add me on to her card. Went from a 550 fico to a 796 fico in about 8 months.
If comments on the tweet were to be believed, the advice was of mixed veracity. Some reported obtaining high scores after parents added them as authorized users, but others said those scores were not as effective as scores obtained by building credit personally — the latter echoed by people claiming to work with lending institutions. And though the tweet indicated the advice worked if the card was paid off “on time,” others cautioned that many people with high credit scores could encounter financial trouble, which would adversely affect authorized users.
In discourse about the advice, “FICO scores” came up quite a bit. FICO (formerly Fair and Issac Co.) is a data analysis firm known for providing credit scores. FICO scores are used by three major credit bureaus (also known as credit reporting agencies, or CRAs) — Equifax, Experian, and TransUnion. According to FICO, their scoring is used by “top lending institutions” in the United States, and it “rank-orders consumers by how likely they are to pay their credit obligations as agreed.”
FICO scores were not always a major factor in loans and extensions of credit. What we currently call a FICO score came into play about three decades ago:
[Bill Fair and Earl Isaac, two statisticians] made a number of correlations between which behaviors made a person a good credit risk and which made them a bad credit risk. And for the most part, their predictions were accurate. But it wasn’t really until the 1970s that credit scores became as important in lending as they are now. The modern iteration of the FICO score, based on credit files from the three credit bureaus — Equifax, Experian and TransUnion — was introduced in 1989.
Before credit scores, people still had credit reports. But these reports weren’t distilled down into three-digit numbers. “Credit scores took a lot of randomness out of lending,” says Ken Lin, CEO of CreditKarma. “Scores were developed in the ’50s, but became much more prevalent in the ’70s, ’80s and ’90s.”
In the thread, users claimed having high scores and no credit history was not very helpful; Lin estimates that a person’s credit score is “only 20% to 40% of the final decision, with the rest being hidden deeper inside the overall credit report and its extenuating circumstances.”
A lot of credit card and finance blogs offered advice posts on adding children as authorized users. Unfortunately, it nearly always mentioned the risks to parents, neglecting to mention the risk this practice might pose to their children as well. Parents turning to those resources received a partial picture, neglecting some of the major pitfalls of that decision.
Many people replying expressed general, profound frustration about the effects of FICO scores and credit reporting agencies — particularly when something like illness or job loss lay outside their control while heavily driving down their supposed creditworthiness. After one of those three agencies — Equifax — had a massive data breach in 2017, The Verge published an editorial about these generalized grievances and a “broken” system:
Even worse, all this information [on your credit reports] is generally being shared without your consent. The three big credit bureaus — Equifax, TransUnion, and Experian — see their customers as the businesses checking people out, not the people themselves. They’re worried about keeping banks and car dealers happy, but the targets themselves are an afterthought. As a result, even basic inaccuracies can persist for years, bouncing between the three major bureaus. (Convincing credit bureaus that you’re not dead, for instance, is much harder than you think.) There have been a few regulations aimed at fixing that — most notably the Fair Credit Reporting Act — but it’s still an extremely clunky system, and the average consumer has little awareness or control over their own profile.
Yet another element likely driving interest in the Twitter thread about kids as authorized users and credit scores of 800 was that by their nature, FICO and the three credit reporting agencies (Equifax, Experian, and TransUnion) remain highly secretive about their calculations of creditworthiness. Credit card blogger The Points Guy explained:
Credit scores consist of a three-digit number, usually between 300 and 850, designed to represent the likelihood that you’ll repay a loan on time. They’re also a little mysterious and that’s not an accident. The major credit-scoring companies, FICO and VantageScore, keep their formulas secret, so only a handful of people know the exact recipe that’s used to turn your credit history into a credit score.
In fact, it was only in fairly recent years that people had any access whatsoever to their own FICO scores. A 2001 article about FICO scores becoming accessible to borrowers reported that people were finally getting to see their scores — because FICO was selling their own information back to them:
When it comes to getting a mortgage, credit card or insurance policy, most consumers have no clue about the most important number affecting their application: their FICO scores, behind-the-scenes calculations drawn from credit reports.
Designed to predict future consumer behavior, FICO scores regularly make the difference between approval and rejection. And even after a loan or insurance policy is issued, FICO scores sway prices and credit lines, with the lowest rates going to consumers with the highest scores … After 35 years, Fair Isaac is finally emerging from the shadows, trying to leverage its influence on household finances to become more of a household name through an online service that sells people their FICO scores at $12.95 per peek.
On Twitter and in the excerpted articles, it was demonstrated that FICO and the three credit reporting agencies typically did little to enable people to manage their own credit scores — except in cases where they hoped to extract money from them for access to their own personal information.
That also ought to make “advice” from said companies slightly suspect. Lenders are FICO, Equifax, Experian, and TransUnion’s primary customer base. Borrowers are a middling secondary market, and consumer financial woes remained an area of massive profit for those agencies. Encouraging risky behavior or unfettered borrowing did, after all, serve to boost the bottom line of all involved.
Bearing that in mind, credit rating agencies did offer tips on adding children as authorized users to build their credit scores. TransUnion’s blog had an Q&A entry about that very topic:
Q: One tip I’ve heard is that a parent can put a child on their credit card as an authorized user and that can sometimes (with some cards) contribute to a child’s credit history. Is that true? What kind of cards should we be looking for?
A: Adding your child as an authorized user is one way to help them begin building a credit score if you yourself have a good credit. With some credit cards, the entire account history can show up on the authorized user’s credit report, so you’ll want to select a card where you have a good credit history. While there are many different credit scoring models available, the most commonly used scores — FICO 8 and VantageScore 3.0 — factor in authorized user accounts when calculating a score. Determining if an authorized user account is right for you is a personal decision — as the card holder you are responsible for any charges on the card, so be sure that you set some guidelines in advance.
TransUnion cautiously advised the practice “if you yourself have good credit,” stopping short of explaining what they meant by “good credit.” (Is that a 650 credit score? 600? 750?) Their answer also vaguely noted that “some” credit cards allow for “the entire account history” to appear on an authorized user’s own individual credit report, suggesting that activity that took place even before the user was added could be factored into their credit profile. That alone made the advice seem risky for anyone who had ever at any point made a late payment on any card.
Equifax also had a blog, a Q&A about children as authorized users, and advice on its effects on a child’s future credit score:
Even though an authorized user isn’t responsible for the financial obligations on the account, they can be impacted by whether or not the account is paid on time. Since they are considered account holders, any activity on the account that is reported by the creditor to any of the major credit bureaus will appear on the authorized user’s credit reports. If the primary account holder pays as agreed, it can help an authorized user establish or build a positive credit history. If they don’t, however, it can have a negative impact. Depending on the credit scoring model, credit scores may also be impacted.
Being an authorized user can be one way to establish responsible credit habits. Some parents will add their children as authorized users to help them establish and build a credit history. Some couples will also add each other as authorized users on an account.
But “you are going to inherit the credit of that cardholder” – for better or worse, said Jennifer Cox, Equifax chief client officer, who has worked in the credit card industry for decades. If you are considering becoming an authorized user on someone else’s account, it’s a good idea to discuss their credit situation with them.
As Equifax described here, a level of risk accompanied any reward, and CRAs seemed to consistently frame those risk as related to “responsibility” or “reliability.” But as we pointed out, damage to credit isn’t always related to responsibility (as we also noted on our page about medical bankruptcy rates). By linking chosen traits or behaviors (like responsibility) to the advice, parents were tacitly advised that their best intentions were good enough to protect their child — but unforeseen circumstances never appeared to be mentioned by credit bureaus encouraging the behavior.
Experian too had a Q&A blog post about adding children as authorized users to help the child eventually build credit. It also used words like “responsible” and “reliable,” advising putative authorized users to “ask the primary account holder” about factors like late payments and even suggesting that those same authorized users ask to see a credit report:
Just as joining a responsible credit user’s account can help you, linking yourself with a less reliable cardholder can hurt you. If the cardholder misses a payment or maxes out their card, your credit could be negatively affected. Some credit reporting agencies, including Experian, do not include negative payment history in an authorized user’s credit report. But others may.
Before becoming an authorized user, ask the primary account holder about past late payments, how long they’ve had the account, and how often they use more than 30% of their credit limit. Experts say those with good credit scores use less than that on a regular basis (and those with the best scores stay around 10% or less). To be extra sure you’re making the right call, consider asking if the account holder will let you see their credit report.
Discover’s Credit Resource Center reiterated the same advice in a Q&A format; Discover does, of course, profit more from borrowers using their subprime products, thanks to higher interest rates:
By Becoming an Authorized User, am I Inheriting the Primary Account Holder’s Credit Habits?
Before you consider becoming an authorized user, the first, and most important, thing to look for is whether the primary account holder pays their bills on time. If they do not make timely payments, that gets documented on the credit reports of authorized users. And credit card issuers report late payments to credit bureaus.
So it doesn’t take much to begin to negatively impact your credit score. What’s more, late payments, as bad as they are, are not the only thing that can hurt you. If the account in question has a high utilization rate, that too can weigh heavily on your credit score.
So before signing on to be an authorized user, it’s best to do your own due diligence by evaluating the credit habits of the primary account holder. Otherwise, instead of working to build a positive credit history, you may find yourself achieving the opposite.
Caveats about debt-to-income ratio accompanied tips about not paying bills late when lenders and CRAs gave advice. But as of 2018, the average American household held $38,000 in personal debt, against a median household income of $63,000 the same year. On top of that, only 41 percent of Americans had the ability to pull together $1,000 in case of an emergency as of January 2020, leaving 59 percent lacking sufficient savings to cover that proposed unexpected expense.
In the larger scheme of things, credit reporting agencies and lenders offered a few broad caveats about transference of negative credit history as well as positive, sometimes advising prospective authorized users to credit check their parents. Overwhelmingly, that advice was couched in such a way users would identify themselves as a responsible borrower, and see less risk than they perhaps should in adding a child as an authorized user.
Now let’s go back to the crux of the advice –in which the child wasn’t consulted, and likely couldn’t assess the risk anyway:
Add your kid on as an authorized user and pay the bill on time. By the time that kid hits 18. Boom 800+ credit score for them to succeed in this world.
Although Equifax, Experian, and TransUnion made it look like a safe bet if you considered yourself responsible (as most people do), no one ever mentioned negative credit history acquired due to a car accident, an illness, job loss, or other catastrophe. One of the advice posts mentioned the authorized user in question doing “due diligence” before piggybacking on a card, but the post referenced children under the age of 18 added unwittingly to parents’ credit cards.
As the first commenter observed above, the advice, like nearly all financial advice, works best for those who are already rich. Credit pitfalls were typically related as much to circumstance as responsibility, and only the wealthy maintained the resources to apply the advice to optimal effect. The rest of the population is typically just one unexpected development away from a score drop.
The massively viral piece of well-intentioned advice posits that adding a child to piggyback on a credit card would grant that same child a FICO score of 800 once they were old enough to apply for a credit line of their own (provided the parent paid their bills on time.) Of the little information given out by FICO and CRAs, an absence of credit history would make that score less useful than it might be for a borrower with their own credit score. But more importantly, many timely bill payers could follow the advice before falling on hard times — even a few months of delayed payments could impart a negative rather than positive history to the child, which would help them not at all.