Protect Authorized Users From Your Debt Settlement
By LaToya Irby in Credit Repair Debt Relief
People typically add family members, significant others, and sometimes even friends as authorized users on a credit card to help boost the authorized user’s credit score. Sometimes parents add their kids to credit cards to help the kids learn how to use credit responsibly. A spouse may list another spouse as an authorized user on a credit card so that spouse can make purchases with the credit card too. Unfortunately, if you have authorized users on your credit cards, your debt settlement could affect their credit, too.
How Authorized User Accounts Work
Just like your credit card history is listed on your credit report, it’s also likely on the authorized user’s credit report, too. It can be helpful for the authorized user when the credit card balance is low and all the payments are made on time. But, if you settle the debt, that too will generally be added to the authorized user’s credit report, even if they had nothing to do with the settlement.
Authorized users have no legal responsibility for the credit card balance, even if they helped rack up the charges. When you default on payments, the credit card issuer isn’t allowed to go after the authorized user for payment because the user is just someone who has permission to make purchases against your account.
If you don’t want your authorized user’s credit history to be affected by your debt settlement, you should have that person removed before you settle your debt. In fact, it’s best if you remove them from the account before you ever miss a payment on the account. That way, anything having to do with the settlement process doesn’t hurt the authorized user. The authorized user’s credit report will still have the credit history up to the point that you remove them. If that authorized user wants to remove the entire account from their credit report, they’ll need to contact the credit bureau’s to make it happen.
Remove the Authorized User
Removing an authorized user from a credit card is a simple process. You can typically call the number on the back of your credit card and let the representative know you want to remove the authorized user from the account. That’s it. The authorized user should be taken off the account and the debt settlement (as long as it hasn’t already happened) won’t show up on that person’s account. If you want an extra guarantee, you can make the request in writing. That way you’ll have proof of your request if there’s ever a question about it.
Handle a Joint Account Differently
It’s a different situation if the other person on your credit card is a joint account holder instead of an authorized user. That’s because joint account holders are equally responsible for the credit card balance. Banks generally won’t let you remove a joint account holder as easily. On top of that, if you attempt a settlement, the bank may decide to purse the other account holder for the full balance. Or, if the bank does agree to the settlement, it will show up on the other person’s credit too and they won’t be able to dispute it with the credit bureau.
If you have a joint account holder instead of an authorized user, talk to that person about how to handle that account. Let them know what you’re planning and see if the two of you can work something out. You may have to keep up the minimum payments on that account, especially if the creditor won’t let you settle without the other person’s consent.