Proper Piggybacking: The Good Credit Person Adds an Authorized User

Dear Credit Care,

My mother declared bankruptcy one year ago and has since had no outstanding debts. However, she needs to build her credit and thought it best to add me as an authorized user on one of her credit cards. I have a good credit score in the mid-700s but I am afraid that her past bankruptcy, as the primary user, would hurt my credit score. I understand the risk of being an authorized user if she does not pay the balance on time -- that's not my issue as I trust her very much. My concern is this: Will her past bankruptcy negatively impact my credit score as an authorized user?  

- Matt

Dear Matt,

From your letter it seems like your goal is to add positive information to your mother's credit report to help rebuild her credit. That could be accomplished more effectively by adding her as an authorized user on one of your credit card accounts. As an authorized user on your account, your positive credit card account information would be added to your mother's credit report and would help accomplish the goal of boosting her  credit score. The technique is called "piggybacking," and you need to be one who is doing the lifting. However, adding you as an authorized user on your mother's account would just add her account information to your credit report. This would not affect your mother's credit report at all and would therefore not help build her credit.

Only those accounts that you own or accounts where you are listed as an authorized user are reported on your credit report. If you went ahead with your plan to be added as an authorized user on one of your mother's credit card accounts, that account and only that account would be listed on your credit report. None of your mother's other accounts or her bankruptcy would appear on your credit report. You don't say whether the credit card accounts were opened after her bankruptcy, or if they somehow stayed open through bankruptcy (a rare event), but in either case, if there is any negative information on them, that would drag down your score.

Because adding you to her account would not help your mother's credit, there is no reason for you to take the chance on damaging your own credit by becoming an authorized user on her account.

Your mother's credit will improve with time as she adds positive information to her credit report each month. It is important for her to add credit only when she has a plan in place to assure on-time and as-agreed payments.

In addition to adding her as an authorized user on your account, if she does not currently have an installment account and could afford to make the payments, she might consider opening a passbook savings loan to help rebuild her credit. These accounts are secured by a deposit made at the bank that issues the loan and are paid back in monthly payments. She already has credit cards; an installment loan will add another type of credit to her "credit mix" -- one of the factors used in credit scoring. Be sure to ask if the bank reports the loan to the credit bureaus, because if the bank does not, it won't help your mother's credit.

Handle your credit with care!