If you are an "Authorized User" beware!

Beware of being an authorized user on someone else’s account. It can work against a credit score.

Case in point: I just started working on a Bank of America Credit Card for a client who was only an “authorized user” of her husband’s account. In other words, her husband applied for and received a Bank of America credit card and he obtained a second card for his wife as an “authorized user”. The account was in his name only and awarded solely on his credit information. Recently her husband passed away. While trying to refinance her home and get all the financial affairs in order, she contacted Bank of America immediately. Bank of America told her that she was not liable for this debt and that she was only an authorized user. She sent a copy of the death certificate so the estate department could close the account. As my client worked with a mortgage company for the refinancing of her home she found when her credit was pulled that Bank of America appeared to have reported the account on her credit report with a balance and late payments even though she was only an authorized user. Worse, despite closing this account and providing proof of death as well as notice from the bank that she was not liable for the debt, Bank of America is continuing to rack up the 30, 60, 90 day lates from the month of her husband’s death because the debt remains unpaid.

In speaking with Bank of America’s estate department, the debt will continue to remain on my client’s credit report, as an authorized user, on a now closed account. It will be reported every month as late into the 120 days mark it not paid. According to a representative at the Bank of America estate department when pressed about credit reporting, the only way to stop this reporting on my client’s file is for my client to apply for ownership of this account and make arrangements for payment. This was clearly Bank of America’s insurance to avoid a loss on this account through the coercion of my client to pay this balance . In the meantime, B of A insisted that my client is not liable for the balance and when requested, agreed to send a letter stating so. Is this legal and can this happen? In theory yes.

My client did receive the letter of debt relief for her mortgage company. To add to the confusion though, this account went from the Estate Department at B of A to the Recovery Dept where I spoke with a knowledgeable gentleman in an attempt to further reconcile this credit situation for my client. When I indicated that B of A was reporting as an authorized user status on my client’s credit report with lates from the date of death and that she was given a letter of non-liability from B of A, the gentleman was surprised and he flatly and unequivocally denied that B of A ever reports “authorized user” status to the credit bureaus. He stated that B of A reports only on the holder’s social security number. In addition, he indicated that B of A immediately closed the account and removed my client from her husband’s original account. They had no record of her social security.

The solution? He indicated that it would be faster to send a letter to the credit bureaus to challenge this debt. B of A would reply back that this is not my client’s debt and it would be removed. Let’s hope this happens.

My previous question “Is this legal and can this happen?” I answered that in theory, yes it can. Let me explain. At one point individuals qualifying for a credit card had the opportunity to allow one or more authorized users and receive several cards to be used on the account. The account numbers on the two or more cards are the same. There is no way to tell who made the charges. This became a huge credit building tactic that was widely discussed in the credit repair circles. To increase credit scores, unrelated debtors would sell the opportunity to become an authorized user on their cards to those hoping to improve their credit scores. Kind of a piggy backing on positive credit. In a conversation with Fair Issac I was told that at one point authorized user information on a credit report had no bearing on a credit score to stop this wide-spread money making scheme. Now an authorized user may be reported at the discretion of the creditor and it does contribute to the authorized user’s credit score.

In the case of my client the information that was reported was negative and did, in fact, harm her score. The fact that B of A says they do NOT report on authorized users further added to the mystery of where the credit bureau got that information. Nonetheless, time will tell if it can be removed by the credit grantor in this case. So beware of allowing yourself to become an authorize user on any account. Make sure you understand if you will be reported to the credit bureaus and what will happen if there is a default by the original debtor.