Adding a young AU (Amex)

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Luxe
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Adding a young AU (Amex)

Postby Luxe » Wed Aug 27, 2014 4:26 am

I might add an AU to help a young person establish credit and remove them after a few years once they have a good card of their own. The AU card would not be used (or maybe a few times a year to show activity). I'm not familiar with how AUs work so hoping I can learn more here.

1. Assuming the card is sparingly used (or not used..) can this hurt my own credit in any way?
2. How does the AU card show up on my credit report? Does the AU balance count towards my statement balance/utilization? Related, does my balance show up on the AU's credit report?
3. Will it hurt me or my AU once I close the AU card in a few years? Obviously it will drop their AAoA but my goal is for them to be better off than if they had zero credit history.
4. If the AU gets their own Amex in the future can they backdate it to 2014?

Many thanks.


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CarefulBuilder14
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Postby CarefulBuilder14 » Wed Aug 27, 2014 10:10 am

I can help with some of this, but not all. Overall, I would point out that the 'boost' an AU gets from being on an established prime account with a big CL is much smaller than it previously was. Credit bureaus and Fair Isaac felt the system was somewhat abused in the financial bubble and meltdown and place much less value on the significance of being an AU.

1. If the AU uses a card shortly before a statement date and a balance reports before you can pay it off, and you have a balance report on at least one different card, then the AU could slightly hurt your credit. This is true even if the balance on the card is very small. If you let a small balance report on that card anyway from your own spending, then the AU makes no difference. Of course, if you become irresponsible and let the card's utilization get really high, then the AU's score could be hit because the account history shows riskier behavior.

2. I don't think the AU is mentioned on your credit report, but I'm not positive. You and the AU share the same balance for credit reporting purposes. With Amex, I'm pretty sure there are spending restrictions that you can impose on an AU's sub-account, but it still is just a part of your account that the AU is authorized to use. So if $300 of your spending reports, and $100 of the AU's, you will see a balance of $400 on both credit reports. The credit reports will clearly say you're the only one legally liable for the $400. It's your individual account and the AU is just an AU.

3. If the AU has balances reporting on other accounts, then the AU's overall utilization will rise. The history will eventually fall off the AU's report several years after the AU card has closed - but the history will remain there and help the AU's credit while he or she creates credit accounts as an individual.

4. I've heard cases where Amex will use the AU date for backdating, instead of the first date that person gets an individual or joint account. So it can happen. Say the AU gets their own individual Amex in five years. The new card and account will say the account was opened in 2014, but no payment history will exist until 2019. This can boost a FICO score and can made for quick approval for some credit cards, but a quick glance through a credit report will make the presence of backdating obvious. For 'major' debt like a mortgage, a lender will almost certainly treat it as a 2019 account. I expect it would also be treated as a 2019 account if the AU got a car loan.
Wallet: Prestige CSP SchwabPlat Freedom It Hyatt SallieMae AAPlat
SD: Arrival BrooksBros BCE ED IHG
Letting new accounts cool off since May
Really not sure what I'll add next or when

Luxe
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Postby Luxe » Thu Aug 28, 2014 8:12 pm

Thanks so much. Sounds like I should go ahead and request AU cards. Even a thin credit file is better than nothing and helps get one started.



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