Never Help A Friend Build Credit | Authorized User 101

Never add a friend as an authorized user on your credit card, to help them build credit. I know people that call themselves friends that always want to be helped at the cost of other people and that’s not being a friend.

I’ll tell you a quick story, I had a client and he cosigned a few loans for his kids, and then they stopped paying and guess who ended up having to keep up with the payments, the dad did.

I learned one very valuable lesson in life, always help people but never at a cost to you. Of Course sometimes you will help a friend and help them carry burden they can't carry on their own, and that will cost you something but that’s okay because they can't do it. But to help a friend do something they can do themselves and end up destroying your future is just foolish.
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1. What is an authorized user and what are the pros and cons

-It's like riding in a two seat bicycle with one pair of pedals

-The main account holder does all the work and they are responsible and that helps you build credit without having to get your own credit card



Pros:

-If you have a credit card with some good rewards, then you can double up on them because now you have two people

-The Person builds credit with your help

-The person doesn’t need to get approve for their own credit card if they don’t have any history or bad credit



Cons:

-The main account holder is 100% responsible, so if I go crazy or just miscalculated, then you are liable ( the authorized user is not legally responsible to pay anything )

-If the primary user is irresponsible and miss some payments, they will hurt the authorized user also

-The primary user will get all the rewards



Bonus:

-When the time comes to remove them, this may hurt their credit

-Because it will lower their available credit and lower the average age of their account also



2. Teach them how to do it ( secured credit card )

-A secured credit card is a card, that requires you to make a deposit to use that as part of your credit limit

-They are the easier cards to be approved for if you are new to credit

-And they also have ones that don’t require any credit like the OpenSky credit card

Here are some credit Options:

-Capital One Secured Credit Card

-Discover Secured Credit card

-Chime Secured Credit card



3. Invisible Authorized

-This is done usually with parents and kids

-But you can also do it friend and family

-But there is one risk ( they could always request a new card to be sent to their address )



The benefit here is:

-You remove all the risk of them doing something that may hurt your credit

-You remove the friction of having to have conversations about things being spent





4. Tell them the truth

-Tell them the method I told you they could use to build credit

-Second tell them, you can buy a house without credit by doing manual underwriting

-Third tell them about the invisible authorized user



Lastly: if they don’t want any of these options, apologize, and say if their any other way I can help let me know but I cannot go beyond this.




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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I'm an Accountant but I'm not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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