Many parents have decided to help their children get an early start with their credit scores. This can easily be done by adding your son or daughter as an authorized user on your credit cards. Your child is able to experience the same boost in their credit score as you do when you pay off the bill on the authorized user account.
If your child has been an authorized user on your credit card account for some time and you are looking to remove them, you may be wondering about the consequences on their credit score.
If you decide to cancel the credit card that somebody else is an authorized user on, the card company will obviously stop sending any further positive payment history to the credit bureaus. The increase in credit score that the authorized user received from the card will cease.
If the authorized user on the account is a young adult, they will experience a larger impact on their credit. This is because young adults have a limited credit history, a 15% factor in your credit score. If the authorized user account is the only line of credit the authorized user has access to, they will experience an even greater drop in their credit score.
Depending on your credit card provider and how they report to the credit bureaus, all of the account history and the increase in the authorized user’s credit score as a result of the card may vanish. This means that the authorized user could be back to square one again. Call and ask your credit card provider to see how they will report the cancellation of the authorized user.
If the authorized user has a source of income and a good sense of financial responsibility, its best to have them apply for their own credit card before removing them as an authorized user. This is because removing an authorized user from an account will lower that users credit utilization rate, which accounts for 30% of their total credit score.
Since this authorized user has some credit history and positive payment history, they should be more likely to be approved for their own card. If you are looking to close the credit card due to fees, give your card provider a call. Most credit card companies want their customers to be happy with their cards and can waive any fees associated with the account.
Whether you are looking to avoid annual fees or are tired of paying credit card bills, closing a credit card account with an authorized user attached to it can have some consequences for you and the authorized user. Be certain to proceed cautiously to avoid any large or profound impact to your credit score or that of the authorized user.