Buzz
An easy way to help someone build their credit is by adding them as an authorized user on your credit card. While this doesn't affect your own credit score, it can significantly help someone looking to boost theirs. However, once you remove them, it could affect their credit in a couple of ways.
There are various reasons you might want to remove someone as an authorized user. It could be your child, who's now ready to establish their own credit score. Or perhaps you’ve realized adding this person was not the best choice. Maybe you're simply closing the card. Whatever the reason, Credit.com expert Geri Detweiler notes that removing them could impact their score in two ways.
Firstly, it could affect the length of their credit history. The age of credit accounts makes up 15 percent of their FICO score. If the account you’re thinking of removing them from is one of their longest-standing accounts, it could hurt their score.
A more significant factor is credit utilization, which accounts for 30 percent of their score. This is the ratio of their available credit to what they actually use. Removing them from your card would also reduce their credit limit, potentially raising their utilization ratio. As Credit.com explains,
Removing your account from the equation will reduce their available credit, which in turn increases the ratio of credit they're using compared to what's available. 'Credit scoring models compare the available credit limits on credit cards against the outstanding balance,' said Detweiler. 'This is typically calculated both individually and as a whole. So, if their balances are high, removing your credit limit could impact their debt usage ratio.'
The reasons adding an authorized user can boost someone's credit are the same reasons removing them can harm it. However, if they have already significantly improved their credit, the effect might be small. For further details, check out Credit.com's full article.
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