Historically, adding a family member as an authorized user to an existing credit card with good
credit history was a great way to help or improve the family member's credit. This much utilized
(sometimes over-utilized) practice can improve an authorized user's credit, but it may not help
the family member secure a mortgage loan.

Some lenders are now requiring the removal of authorized user accounts before they will
approve a loan since the credit report and score is not an accurate reflection of the borrower's
own credit history. Due to the fact that an authorized user is not responsible for, and usually
does not make payments on the credit card, the removal of these accounts could mean a loss,
or dramatic decrease of their credit scores and possibly denial of the loan.

Over the years, "piggybacking" (the use of someone else's credit as an authorized user) has
become frowned upon by mortgage investors. Some authorized users have actually paid
individuals a fee to use that person's good standing accounts on their own credit file. To be
added as an authorized user on someone else's account can cost anywhere from $500 to
$5000 depending on the history of the card. This practice has given authorized user accounts a
bad name.

Adding a family member as an authorized user should be a stepping stone to help them
establish credit, but not a long term solution. Once the authorized accounts have helped them
establish new credit and credit scores, this person should start establishing credit on their own.
Secured credit cards or secured lines of credit are an excellent way to build credit. Most gas
cards and department store credit cards are other ways to build credit. It is important to make
payments on time and keep balances low - preferably below 25% of the high credit limit. And it
is best to establish two or three credit cards in their name.

Once credit has been established in their own name, it is wise to have the authorized accounts
removed from their credit. The credit account holder (those responsible for payment on the
account), will need to make the request to the creditor for the removal of any authorized users.

Many buyers may not be aware of the importance of establishing credit in their own name. If
done correctly and with proper planning, new home buyers won't have as many credit related
hurdles to jump over when it's time to purchase that new home.