Improving credit by being added as AU while preparing to buy a house

[put me in coach]

Hello! Thanks in advance for any advice and help with this!

Credit is ~775 on Equifax, ~745 on TransU, and ~730 on Equifax (the latter two according to Credit Karma).

I always pay credit cards on time, but my credit diversification isn't great and average age of account is only 1.75 years.

We are looking at buying within 3-6 months possibly.

If I were to be added as an Authorized User (AU) on a family member's account that is in excellent standing and is, idk, ~10 years old, that should help, yeah?

I've heard that I should not be opening any new credit accounts within 4 months of going to the bank to check credit for the mortgage. Would being added as an AU on another account within 4 months be bad, or would it show up on my account as not new but old (and of course that's how it helps my credit score)? That seems right to me, but want to make sure before. The mistake would be too costly.

[HipGnosis]

It will show up as however old the account is.
You want the card holder to have < 15% usage (balance due / credit limit) on the card.
And you want the card holder to place a small charge or two, and pay it off every month until you get your mortgage.

[ducky19]

Your credit scores are already good enough that you should be able to get a good rate on a mortgage. I definitely would not pay to be an AU, but if you have a family member that has a good tradeline they could add you to, it would be nice to get your age of credit history up there a little. The only thing to beware of is that they pay the card on time and it has not had any late payments - this would lower your already great credit score! As Hip stated, they need to use the card but keep usage to ideally under 10%. Good luck!

[put me in coach]

Thank you both!

The AU partner has some very old cards, maybe some with mixed history, but much better over the last couple years. Is the history historic enough, or will it be a factor? How recent is too recent for late payments? (I have yet to approach this family member and I only know so much about their credit history.)

The usage is probably higher than 10-15%. If they were able to keep it that way for the next couple months, would it be alright?

The credit score is good, but home prices are so high here that every little bit counts, especially when calculated in opportunity costs in what it could be going towards instead.

Separate question about credit scores: student loans were paid off last year, but it's not mentioned at all on either credit karma credit score. Should it be? If it should/can be, is it possible to pursue getting it to show up? That would demonstrate some diversification.

[Lmoot]

Your credit score seems pretty high for such a small number of years in history, considering length of history is nearly a third of many scoring models. I would definitely try and find out the exact score and model your perspective lenders use so there isn’t a surprise.

[put me in coach]

Your credit score seems pretty high for such a small number of years in history, considering length of history is nearly a third of many scoring models. I would definitely try and find out the exact score and model your perspective lenders use so there isn’t a surprise.

But i can't do that w/o a hard pull, right?

I learned more about the credit accounts of my family member with whom i'd attempt being added as an AU. He has always paid at least the minimum payment, but does let a balance ride statement to statement (i know, not at all Mustachian). But balance has been at about 15%. Credit card account is 10+ years old. Should i add on as AU? Does it matter that he carries a balance if he makes a (minimal) ontime payment every statement?

[Catbert]

It doesn't matter whether or not he pays in full each month, only that he pays on time.

[Aegishjalmur]

Hello! Thanks in advance for any advice and help with this!

Credit is ~775 on Equifax, ~745 on TransU, and ~730 on Equifax (the latter two according to Credit Karma).

I always pay credit cards on time, but my credit diversification isn't great and average age of account is only 1.75 years.

We are looking at buying within 3-6 months possibly.

If I were to be added as an Authorized User (AU) on a family member's account that is in excellent standing and is, idk, ~10 years old, that should help, yeah?

I've heard that I should not be opening any new credit accounts within 4 months of going to the bank to check credit for the mortgage. Would being added as an AU on another account within 4 months be bad, or would it show up on my account as not new but old (and of course that's how it helps my credit score)? That seems right to me, but want to make sure before. The mistake would be too costly.

 I was in mortgage so here are a few things to be aware of:

Mortgage companies will usually use the middle of your 3 scores as your credit rating. As it is over 720, you really don't have to worry(your score would not be an issue even lower but pricing on your interest rate can be impacted depending on the risk level). I wouldn't bother getting added on.

The creditor will look at the age of the accounts as a risk but will note if you have low usage, paid on time ECT so will really not be impactful for you, it is just something the underwriter like for and wwilladdress in their notes.

Regarding usage; for every 25% of the credit limit used on each card your score takes a bit, and the hits get bigger so keeping under 25% usage of paying in full is helpful for your score.

Regarding if the card is paid in full or just paid on time: this really doesn't matter as since it is an with an with user account, the underwriter has the discretion to exclude it from your file(so not count the payment towards your dti ratio). If you can qualify with the payment, the Underwriter will usually leave it in as is the most conservative option.

It will show up on your record the same way it does on your parents, so shows total time opened, not just since you were added.

The issue regarding not having new credit inquiries in the last 90 -120 days (it depends on the loan program how far the lender looks back)- it takes time for items to show on a credit report, so if you have an inquiry but no corresponding account, you will be asked for an explanation on what that inquiry was for and if any new debt was obtained. If there was new debt, you will need to document it and it will be added to your ratios. Thermal with getting added to your parents card is if you are added as a joint user, not just as an with user, then that payment would count against you, unless your parents weren't using to provide evidence that they had been the ones to make the payments, not you, for the past 12 months.....

Though it doesn't seem to be an issue for you as all 3 bureaus generate a score, if all you had was authorized user accounts, the lender may ask for nontraditional credit references- things like auto insurance, utility bills and rent to show you have the ability to make payments. The issue here is that the score wouldn't reflect your actual credit rating, and at this point you will have additional restrictions put on what type of mortgage, minimum down payment, loan total value and dti/housing ratios.

Also be aware, even if you pay a card in full monthly, if you use it on a regular basis you will still usually get hit for the minimum required payment as you are not required to pay it in full. So in other words, having multiple cards used every month, even if you pay them in full can torch your ratios.

Tl/Dr: For you, given your scores, likely would have no benefits and would potentially make more work for you and your lender.

[Dicey]

This question is kind of like saying, "I studied and I know the material, but I happen to be sitting next to the smartest guy in the class and I can easily see his test. Should I look at it?"

The answer is that it just isn't necessary, so why do it?

What kind of down payment do you have? With your scores, you should be fine, assuming a decent DP.

Anecdote of one: I had a prospective tenant who interviewed well and filled out a credit application. When jt came back, his scored were okay, but I saw that he was listed as an AU. I really dug into his report. I interviewed him again and his house of cards fell apart. Had he not been trying to game the system, I might have given him a shot. (I'm also grateful that thanks to the AU threads on this forum, I knew what the game was.)

FWIW, if a relative approached me with a request like this, there is no way I would agree to it. There's also a very good chance that I'd remember forever that they tried to use me to game the system.

[HBFIRE]

You'll want to check with the lender on their tradeline requirements.

You already have excellent scores, and your scores alone will put you at the highest tier (740+).  That said, generally lenders like to see at least 3 "seasoned" tradelines (at least 2 yrs old) on your credit report -- normally AU tradelines don't count towards this.

That said, I'd consult with a lender on their credit tradeline requirements and whether or not authorized user tradelines count.  If you're a FTHB, the requirements might be more lax.  It's been awhile since I've looked into credit requirements for a mortgage.

[HipGnosis]

Also be aware, even if you pay a card in full monthly, if you use it on a regular basis you will still usually get hit for the minimum required payment as you are not required to pay it in full. So in other words, having multiple cards used every month, even if you pay them in full can torch your ratios.

This doesn't make any sense to me.  Please explain, without any jargon.

[put me in coach]

Wow, thanks everyone. That seems very helpful. Looks like I don't need the AU after all. I'll research the requirements from our potential lenders. Thank you.

[Car Jack]

Also be aware, even if you pay a card in full monthly, if you use it on a regular basis you will still usually get hit for the minimum required payment as you are not required to pay it in full. So in other words, having multiple cards used every month, even if you pay them in full can torch your ratios.

This doesn't make any sense to me.  Please explain, without any jargon.

I think what they're saying is that your usage is reported before you pay it off.  So if you charge 90% of your credit limit, that's going to throw a red flag, even if you pay it off every month.  You can get around that by paying some of it off before the reporting date.

[HBFIRE]

You already have excellent scores, and your scores alone will put you at the highest tier (740+).

Sorry, correction to this, 760+ is the very top tier for mortgage purposes.  So you might have some room for improvement with an AU tradeline.  Make sure the card being added is not Amex, as it will not boost your score.  Also, there are numerous FICO scores used for different industries.  For mortgage lending, they tend to use FICO 5.  If you want to know your actual FICO 5 score, you could pull all 3 scores on myfico.com which will give you all your FICO score flavors for each credit bureau.  Another tip for improving your score short term is to pay down your credit cards to a low amount before they report your balance.  This will decrease your utilization ratio.  Since most people auto-pay, the balance is reported before the card is paid off, hence this could impact your utilization ratio.  Utilization ratio is a significant portion of FICO credit score modeling (up to 30% of total score).  Additionally, you could request credit limit increases on the cards you have.  If you have any outstanding loans (i.e. student loans), paying those down to lower the amount owed ratio will help too (I paid my student loans down to $50 and am letting them sit until they are finally due in several years -- keeping them helps my credit profile).  Depending on your credit profile, this may or may not be helpful.

[put me in coach]

You already have excellent scores, and your scores alone will put you at the highest tier (740+).

Sorry, correction to this, 760+ is the very top tier for mortgage purposes.

...

If you have any outstanding loans (i.e. student loans), paying those down to lower the amount owed ratio will help too (I paid my student loans down to $50 and am letting them sit until they are finally due in several years -- keeping them helps my credit profile).  Depending on your credit profile, this may or may not be helpful.

Ah, bummer. 740 was too good to be true. I'll continue to consider the AU.

I zeroed out my student loan about 11 months ago :/. It's not showing up on my credit karma accounts at all. I know it's paid off, but should it still show something there?

[BrightFIRE]

You already have excellent scores, and your scores alone will put you at the highest tier (740+).

Sorry, correction to this, 760+ is the very top tier for mortgage purposes.  So you might have some room for improvement with an AU tradeline.  Make sure the card being added is not Amex, as it will not boost your score.  Also, there are numerous FICO scores used for different industries.  For mortgage lending, they tend to use FICO 5.  If you want to know your actual FICO 5 score, you could pull all 3 scores on myfico.com which will give you all your FICO score flavors for each credit bureau.  Another tip for improving your score short term is to pay down your credit cards to a low amount before they report your balance.  This will decrease your utilization ratio.  Since most people auto-pay, the balance is reported before the card is paid off, hence this could impact your utilization ratio.  Utilization ratio is a significant portion of FICO credit score modeling (up to 30% of total score).  Additionally, you could request credit limit increases on the cards you have.  If you have any outstanding loans (i.e. student loans), paying those down to lower the amount owed ratio will help too (I paid my student loans down to $50 and am letting them sit until they are finally due in several years -- keeping them helps my credit profile).  Depending on your credit profile, this may or may not be helpful.

Neither of these statements is true.

Amex no longer lets you piggyback on age of tradelines, so wouldn't add to average age of accounts, but the increased credit available/lowering of credit utilization would likely still be a score boost.

All of these online score-checking algorithms will come at you as though you "need" an installment loan to improve your score. They always have 3 suggestions on "things that are affecting your score" no matter what your score actually is. My scores are over 800 and I'm still getting these ridiculous suggestions - it's an algorithm, it doesn't mean anything. Pay off your loans.

Also, it's my understanding that you (as a consumer) cannot access the scores that banks/car companies/etc. use, so getting a paid score probably doesn't matter, although it will likely be closer than what CreditKarma shows, since they use Vantage. OP, don't bother with the AU - it sounds like  you'd be adding negatives without enough positives to balance it out.

If you want to goose your score, only use 1 card, make sure the balance is <10% of your credit limit for that card, pay it off every month in full after the statement hits. Ask for a credit line increase on each card, but only if you can get it with a soft pull, because a hard pull isn't worth the ding to your report right now.

[HBFIRE]

Amex no longer lets you piggyback on age of tradelines, so wouldn't add to average age of accounts, but the increased credit available/lowering of credit utilization would likely still be a score boost.

Correct, I should have clarified.  The age of the credit history is the major reason for the credit score increase when "piggybacking", hence why tradeline companies don't sell Amex tradelines (they have minimal impact on score).  There is much more value in the length of the credit card history.  Sure the credit utilization might help in some cases, but most would benefit significantly more from the actual credit history length which Amex does not provide.

Also, it's my understanding that you (as a consumer) cannot access the scores that banks/car companies/etc. use, so getting a paid score probably doesn't matter

This is inaccurate.  You can get your actual FICO scores for each bureau and version.  myfico provides them all.  You can also obtain free FICO scores from multiple credit cards:

Amex - Experian Fico 8 
Discover - Transunion Fico 8
Barclays - Transunion Fico 8
Citibank - Equifax Fico Bankcard 8 
BoA Transunion FICO Score 8

You highlighted my student loan comment but I'm not sure why.  Installment loan ratio is a factor of FICO score modeling.  Once an installment loan is paid off, it will slightly negatively impact your scores.  Additionally, the installment loans will be removed 10 years after they have been paid off.  There is quite a bit of data on this.  This is a subject I've majorly geeked out on over the past 3 years so I'm sort of an expert on it to an extent.

[Lemonhead]

Several years ago I added both my kids to Home Depot (Citibank) card with $10k limit, at least 10 years old, paid in full every month.

22 yr old DS was appreciative this summer because other than this he had NO credit history.  He wanted his 1st apartment and they ran credit report.  He was happy that Credit Karma showed he had excellent credit!  He was moving across town prior to starting job and technically had no income at the time.  He had $15k or so in savings and also showed his job offer.  I presume the good credit score also helped with his car insurance rates that we transferred to his own policy at the same time.