Surprising Credit Report

Xstatic3333 · November 2013

So I finally worked up the nerve to check my credit report this morning (not sure why I was nervous-it was good!) and was surprised to see two credit cards with high balances listed that I was unfamiliar with. After a little sleuthing, I figured out that these were cards my parents had added me to as an authorized user in case of emergencies back when I was in college. It has probably only helped my credit score; though both had surprisingly high balances they were also well under half of the available credit and had perfect payment histories. I felt very awkward seeing what my parents' credit card balances are!

My question/concern is whether the minimum payments on these cards will effect my DTI when we apply for a mortgage in a couple of years. I'm sure I can have my parents remove me if need be, but it could lead to some awkward conversations. I'm shooting for a consumer debt free lifestyle, while they are high earners who are comfortable carrying debt. I can't think of a way to bring this up that doesn't scream, "thanks for throwing me a lifeline back in college, but now I don't want your big monthly payments bringing me down." Of course, I'm an adult and I will bring it up if I have to, but I always thought being an authorized user did not mean that the particular line of credit would "count" against you.

Potentially useful info: I checked using Credit Karma, not an official report. Also, I did tell my parents that I could see the cards on my credit report (and that they were welcome to take me off of them at any time) but I didn't tell them I could see what the balances are. I don't think they check their own credit much so they may not realize it works that way.

hoffse · November 2013

I guess I'd want some clarification about one thing - are these balances they are carrying month to month or are they balances that your parents pay off in full each month? I know that I wait for my credit card to close before paying it off in full, so at any given time I have "consumer debt" to the extent that the billing cycle for that month is still open. Depending on what we've bought, this can be pretty high at any given time - example, last month we "bought" H's bar exam course, and that sucker runs about $3000. We charge everything to get points because we always pay our cards off in full.

If your parents are carrying a balance from month to month I would be inclined to get off those cards. Their spending history on those cards will affect your credit, and yes that debt will be counted in your DTI when a bank looks at everything. Keep in mind that even if they're only using half of their available credit, the goal should really be to use less than 10-15% of your total available credit overall.... and those balances are being counted in terms of the percentage of available credit YOU use each month. So if you don't have enough credit from other cards to offset those high balances, it might be overextending YOU from a credit perspective, even if it's not overextending your parents. Does that makes sense? The only things I would consider before getting off those cards are:

1) How much of your total available credit do those cards make up for you? Those cards probably have high limits since your parents are high-income earners. So if it would cut your available credit in half or something, I might not get off those cards until after you buy a house (since you say your overall score is good).

2) Do you have other cards that are old enough to show a long credit history? I still have my very first credit card from when I was 18, even though I never ever use it, because I want that card for the purposes of showing a long credit history when we apply for a mortgage. After we buy a house, though, I'm going to close it.

If you know you are going to be buying sooner rather than later, then don't do anything new with your credit one way or the other - I'd want at least a year of no change in terms of the cards I have opened and closed before applying for a mortgage. On the other hand, if you're pretty sure that you are a couple years away, your credit score should have time to recover from the initial "hit" you will take by closing those cards.

Just try to keep your overall usage less than 15% of your available credit each month (less than 10% is ideal). That may mean you have to open more credit after you get off your parents' cards, especially if you use credit cards very often like I do. Again, I think it's fine to open a new card to increase your overall credit if you are more than a year away from buying. Open it but rarely use it. Then the banks will see a clear history of appropriate credit usage relative to your credit availability.

Apollo11235 · November 2013

Just wanted to jump in and say that if you decide to get off your parents' cards to get them off your report, you'll probably have to specifically ask to get them removed from your credit report. You should be able to do this because you have no payment responsibility, but it takes some time and effort.

I was on my parents' card for a while, had them remove me, and it's still on my reports now because I haven't had reason to go to the trouble of having it removed yet.

Xstatic3333 · November 2013

Thank you both; those are helpful things to think about. As of today I am carrying ZERO CC balance of my own (yay!) but do plan to use my cards periodically to keep them active. I will never carry a balance again unless it is a true emergency. My only active debts are now my car (will be paid off in a year and a half) and federal student loans (8-10 year plan).

We have a solid plan to build savings, but are not high income earners and in our field, never will be. From the balance I saw on my parents' card their monthly payments must be at least $300, so I'm thinking I need to get off of there to keep our DTI accurate. Sigh. I know they carry a balance because I'm very close with my mom, and it has come up in conversation.

I'm not too worried about the credit hit; H just found out through his research that only the lowest score of the couple counts for mortgage rates. H's credit is good but will still almost definitely be our lowest. If I get off of these cards and open another of my own (maybe one of those Fidelity Amex's we were discussing recently!) I don't think it will sink our home ownership aspirations. The ratio they are carrying is similar to the one I was carrying until just today, so that shouldn't be too different. I've had my oldest card for almost ten years, so the length of my history is pretty solid as well.

jtmh2012 · November 2013

I was on my parents cards as an authorized user back in high school/college. They removed me from the cards a long time ago, but it still shows on my credit report. In my case though, I don't worry about it as they pay their cards in full. I read something recently that said accounts that you're merely an authorized user on wouldn't be included in your FICO score (not sure when the change will happen), but that doesn't mean it won't show up if someone pulls the full report.

hoffse · November 2013

I might be wrong but I think it is included in your FICO score if you're still an authorized user. That's why it can be risky to be an authorized user on a spouse's card if your spouse is spendy. That might be changing here, but if I were a bank I would still consider it. If it shows up on your report they can interpret it however they wish, internally.

Either way, if you have time to recover from the hit I would get your parents to remove you from those cards and then call the credit bureaus to see if those cards can be taken off your credit report.

Surprising Credit Report

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