Dear Credit Care,
My 23-year-old son is car shopping and when they pulled his credit report it showed he had a charge-off for a gas credit card in 2010 as an authorized user. My son acquired his first credit card in February of this year and it is in totally good standing. He has no other items on his credit report and no debt. When he was 15, as a convenience, I asked my gas card company if my son could use my gas card and they sent me a card with his name on it. I never asked for him to be added as an "authorized user" or anything else that would hold him financially responsible. I only got the card as a convenience, which they suggested! He never signed anything. I settled this credit card in 2010 for less than was owed on it. How can this be on his credit report when he was a minor and never signed anything, and I was not given any explanation at the time? They offered me an extra card. I accepted it. My son filed a dispute online with Equifax yesterday stating this was not his account and he was a minor when it was opened in 1999. Is there anything else we should be doing to remove this? I am just sick about this error on my part. Please help me make this right.
You are correct that as an authorized user, your son was not and is not financially responsible in any way for this debt. Unfortunately, this situation is more common than most people may think. Even though you did not expressly ask that your son be added as an authorized user, your request for a credit card that he could use effectively did just that, because a card with his name on it was sent to you. Authorized users have access to the account, typically with a card in their name, but are not owners on the account and hold no financial responsibility.
Both you and your son can request that he be removed as an authorized user from the account, but with the account closed due to the charge-off, the gas company may or may not honor the request. If the gas company does remove him as an authorized user, the company will stop reporting the account for your son and it will drop from his credit reports. But, even if they don't agree to remove him, there is some good news in this situation. One, Experian automatically removes authorized user accounts that are reported as negative. So that credit bureau report will have nothing but positive information on your son. Two, the more positive information your son adds to his credit reports with on-time and as-agreed payments on his credit card account and future accounts, the less impact the negative authorized user account will have.
I believe your son took the right step in disputing the item with Equifax. Due to the fact that the account was in fact charged off while your son was an authorized user, the information is being reported accurately and as a result Equifax and TransUnion may refuse to remove it from his credit report. Unfortunately, should that be the case, it will be another five years before this charge-off will drop off of your son's credit reports.
Adding an authorized user to an account can make good sense for parents who want to help their child build a credit history, but only if the parent pays the account on time and as agreed every month. The best way to help a child build credit as an authorized user is to select an account of yours that is in good standing, well below its credit limit and always paid on time. These factors are all used when computing credit scores and when those parameters are met, result in good scores for both the parent and the child. However, as you have found, if there is a negative listing on a credit report with an account that includes authorized users, the authorized users credit reports will also suffer.
Handle your credit with care!