Credit

Ask Jean Thursday: An Account Addition

Posted by Jean

My husband has a couple of credit cards that have high limits but no balances. We are considering added my name to those accounts in an effort to improve my debt ratio and credit score. Is this a good idea?

- Traci, Alaska

Whether or not adding your name to your husband’s accounts will improve your credit score depends on a couple of factors. “If the account is new, or young then your score could go down,” says Credit.com’s John Ulzheimer. He adds that if the accounts become overly utilized, it could ding your score as well. However, if your husband’s accounts are well established and you don’t foresee over-utilization being an issue, by all means, add yourself as an authorized user. Here’s why doing so can give your credit score a boost:

It can lower your utilization ratio. When you sign on to your husband’s accounts, it will affect something know as your aggregate revolving utilization ratio, which in turn affects your credit score. Revolving utilization is the amount of your revolving credit limits that you’re currently using. Revolving accounts are those where your monthly payment is based upon your balance. Your revolving utilization is equal to your total balances divided by your total credit limits. “If by being added she lowers her aggregate revolving utilization then her score will likely go up,” says Ulzheimer. To improve your credit score, you’ll want to aim for revolving utilization ratio that’s at a level of 10 percent or less.

It can give you a longer credit history. “If by adding the account she significantly increases the age of her credit report, then her score will likely go up,” adds Ulzheimer. If you have a credit history that’s on the short side, adding yourself to your husband’s more established accounts can boost your score due to the fact that 15% of your credit score is based on the length of your credit history.

Zero liability. While having zero liability for the charges to your husband’s account won’t directly improve your credit score, it can prevent you from having credit issues further down the road. “One huge upside is because there is no liability for the payment she can always “jump off” the account and save her credit,” says Ulzheimer.