What Are Authorized User Accounts
An authorized user account means someone else owns the credit account, but they gave you permission to use it. This happens when parents add their children to credit cards to help them build credit history, or when spouses share accounts.
The account shows up on your credit report even though you're not legally responsible for the debt. Your credit score benefits from the account's payment history and credit limit, but you didn't actually open or manage the account yourself.
Say your parents added you as an authorized user on their credit card when you turned 18. That account appears on your credit report for the next 10 years, helping your credit score. When you apply for a mortgage at 28, that tradeline shows up on your credit report.
Manual Underwriting Rules for Authorized User Accounts
For manually underwritten loans, lenders cannot count authorized user tradelines toward your credit history. The underwriter must ignore these accounts when evaluating whether you have sufficient credit history.
This rule has three exceptions. First, if another borrower on your mortgage application owns the authorized user account, the lender can count it. Second, if you can prove you made all the payments on the account for at least 12 months before applying, the lender can use it. Third, if your spouse owns the account but is not applying for the mortgage with you, the lender must consider it.
Here's how the second exception works in practice. You're an authorized user on your mother's credit card, but you've been making all the payments for the past two years while living at home. You can provide canceled checks or bank statements showing you paid the monthly bills. The lender can count this tradeline in your credit analysis.
Required Documentation for Authorized User Accounts
When you want to use an authorized user account in manual underwriting, you need written proof that you made the payments. Acceptable documentation includes canceled checks, bank statements showing the payments, or receipts from the credit card company.
The documentation must cover at least 12 consecutive months before your mortgage application date. The lender needs to see that you were the "actual and sole payer" during this period.
If you paid some months and the account owner paid others, the account doesn't qualify. The rule requires you to have made every single payment during the 12-month period.
Impact on Your Debt-to-Income Ratio
When you use an authorized user account based on payment documentation, the monthly payment becomes part of your debt-to-income ratio. The lender treats it like any other monthly debt obligation.
The payment history also matters for credit analysis. If the account shows late payments during the period you were making payments, those late payments count against you. The lender cannot ignore negative payment history just because you're an authorized user.
Say the authorized user account has a $150 monthly minimum payment and shows two 30-day late payments in the past year. If you can prove you made all 12 payments, the lender adds $150 to your monthly debt obligations and considers the late payments in your credit evaluation.
Spouse-Owned Authorized User Accounts
The rules change when your spouse owns an authorized user account and your spouse is not applying for the mortgage with you. In this case, the lender must consider the tradeline regardless of who made the payments.
This requirement exists because married couples often share financial responsibility even when only one spouse applies for the mortgage. Fannie Mae assumes the non-borrowing spouse's credit accounts reflect the household's credit management.
You cannot choose to exclude your spouse's accounts from consideration. The lender must include them in the credit analysis and debt-to-income calculation.
Desktop Underwriter Differences
These authorized user restrictions only apply to manual underwriting. Desktop Underwriter (DU) has its own algorithms for evaluating authorized user accounts, covered in guideline [[B3-5.3-09]].
DU considers multiple factors when analyzing authorized user tradelines, including the age of the account, payment history, and your overall credit profile. The system may give these accounts full weight, partial weight, or no weight depending on the circumstances.
If you're getting a DU approval, you don't need to worry about providing payment documentation for authorized user accounts. The automated system handles this analysis.
Common Problems with Authorized User Accounts
The biggest issue comes when borrowers don't realize they're authorized users rather than account owners. You might think you have a strong credit history, but discover during underwriting that your best tradelines don't count because you're only an authorized user.
Another problem occurs when you made most but not all payments on an authorized user account. The 12-month requirement is strict. If the account owner made even one payment during that period, you cannot use the account for manual underwriting.
Young borrowers often struggle with this rule. They may have excellent credit scores based largely on their parents' authorized user accounts, but find they don't have enough independent credit history for manual underwriting.
Documentation can also be challenging. You need clear proof that payments came from your accounts, not joint accounts or accounts where the primary user could have made the payments. Bank statements must clearly show the payments going to the specific creditor.
References
For the official guidelines, see B3-5.3-06: Authorized Users of Credit in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B3-5.3-06, Authorized Users of Credit (10/30/2009)
Authorized Users of Credit
When a credit account owner permits another person, typically a family member who is managing credit for the first time, to have access to and use an account, the user is referred to as an authorized user of the account. This practice is intended to assist related individuals in legitimately establishing a credit history and credit score based on the account and payment history of the account owner, even though the authorized user is not the account owner.
Consideration of Authorized User Accounts
For manually underwritten loans, credit report tradelines that list a borrower as an authorized user cannot be considered in the underwriting decision, except as outlined below.
An authorized user tradeline may be considered if:
another borrower in the mortgage transaction is the owner of the tradeline; or
the borrower can provide written documentation (e.g., canceled checks, payment receipts, etc.) that they have been the actual and sole payer of the monthly payment on the account for at least 12 months preceding the date of the application.
If written documentation of the borrower’s monthly payments on the authorized user tradeline is provided, then the payment history — particularly any late payments that are indicated — must be considered in the credit analysis and the monthly payment obligation must be included in the debt-to-income ratio.
An authorized user tradeline must be considered if the owner of the tradeline is the borrower's spouse and the spouse is not a borrower in the mortgage transaction.
These requirements do not apply to loan casefiles underwritten through DU. For DU requirements, see B3-5.3-09, DU Credit Report Analysis.
