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Becoming an Authorized User during a Bad Credit Auto Loan

While making regular payments on a bad credit car loan you can become an authorized user on a credit card to give your credit score an additional boost

Getting back in the game

Raising your credit scores quickly and getting back in the game can sometimes take quite a while, especially if you have bad credit and you’re currently financing a vehicle using car loans with bad credit. I know this is true because here at Auto Credit Express we’ve spent the last two decades working in special finance departments throughout the Midwest with consumers who have bad credit.

A number of years ago, this experience led us to develop our web site at www.autocreditexpress.com that features a secure online bad credit auto loan application form so that car shoppers can apply for a loan from the comfort and convenience of their home or office. The application is then processed and forwarded to a dealer that specializes in all aspects of car finance.

The lenders these dealers use will report your payment history to the credit bureaus (unlike a tote the note dealer) so that by paying your loan in a timely manner, you’ll have a good chance of reestablishing your car credit and improving your credit scores.

And speaking of credit scores, there a number of things that can be done in addition to auto loans for bad credit to raise your FICO scores. Most are legal, while some are not.

One particular legal method, while it won’t help you reestablish your auto credit, involves being added as an authorized user on a credit card account and it can raise your credit scores in a very short time.

Understanding the authorized user

An authorized user is someone assigned to a credit card account that is someone other than the account holder. The practice of adding someone as an authorized user to a credit card account is known as “piggybacking.” When someone becomes an authorized user on a credit card account with an account holder that has a high credit score, this can raise the FICO score of the authorized user in a couple of ways.

The first advantage of “piggybacking” on the account of someone who pays like clockwork every month is that this positive credit activity will appear on the credit report of the authorized user and will raise that person’s credit score, as well. The second advantage is that the increase in available credit will increase the authorized user’s credit “ceiling”, lowering their debt ratio, which, in turn, will further raise their credit score.

Rebuilding credit

In many cases, companies that specialized in credit repair will solicit credit card account holders that have high credit scores, offering to pay these account holders for the use of their accounts for the sole purpose of adding an authorized user. The company will then assign their clients to one or more these accounts in order to raise their credit scores.

These authorized users are not able to charge anything to these accounts and in no way do they have access to any of the personal or financial information these accounts contain. Simply by being on the account, they are able to take advantage of the regular payment history of the original account holder and this positive credit history is also reflected in the authorized user’s credit report, thus improving that person’s credit score as well.

The credit bureaus response

As this practice became more prevalent, it began to attract the notice of FICO (the company behind the credit score) as well as the three major credit bureaus – Experian, TransUnion and Equifax. Their response was to create a new credit-scoring model, called “FICO 08”, which contained an algorithm designed to ignore authorized user accounts when calculating a credit score.

This plan, however, ran into a snag – and a large one, at that. According to FICO, ignoring authorized users would block the company’s compliance with Federal Reserve Regulation B. This regulation requires lenders to consider shared accounts of spouses when considering a married person’s credit risk. If FICO’s new scoring model ignored these relationships, it would’ve run afoul of the regulation.

FICO says it has discovered a way to restore authorized user accounts to its formula while, at the same time, reducing the impact of piggybacking. The fact is, however, that authorized users are still a part of FICO 08’s mathematical analysis – although possibly not as big a part as in past formulas.

The downside

Even if you do decide to go the authorized user route and the account appears in your credit report, there is a downside to the issue. The fact is, if the account holder continues to pay his or her bill like clockwork, your credit scores will likely continue to reflect this positive activity. But if, for some reason, the account holder begins to fall behind or even miss a monthly payment or two (or worse), your credit score could also take a serious hit.

The Bottom Line

When all is said and done, you need to decide for yourself how you want to go about repairing your credit and improving your FICO scores. Just be sure, before you go ahead with your plan, that the process you’re using is legal and, if you choose to be an authorized user, that you can cope with the possible downside if the account holder suddenly changes their paying habits.

One thing you can do that is legal is to apply for a bad credit auto loan at www.autocreditexpress.com. During the past two decades, we have helped thousands of people with bad credit buy cars and reestablish their credit at the same time through a nationwide network of affiliate dealers that specialize in bad credit car loans.

So if you are serious about getting your credit back on track, why not begin a new chapter in your life by filling out our bad credit car loan application now.

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