The Price of Love Gone Bad

Have you ever been burned by love? Really, who hasn’t at some time or other? And while it may have taken you days, weeks or months to recover, you did live to see another sunny day. But were your emotions the only price you paid?

Think of this scenario: You’ve been dating your boyfriend for several months and things are looking rosy. But, in conversation, he’s mentioned a few snags he’s had with his credit. You, on the other hand, have proudly kept your credit history squeaky clean. While it may seem nice or even romantic to think about adding him to your credit card account to help him improve his credit, the gesture may not work as you expect, or could even backfire on you.

Still want to help? Here are some things to consider:
You can either add your significant other as an authorized user or as a joint accountholder on your credit card account. There’s a difference between these, and though adding him to your account won't, by itself, drag down your score (since his credit history won't merge with your credit report), the actions either of you take with your account will affect both your credit scores, since all actions affect anyone whose name is on an account.

As an authorized user, your significant other won’t be on the hook for the payments, that’s still on you. And, he may or may not see the card’s payment history reported on his credit report. This is because the Equal Credit Opportunity Act of 1974 encourages creditors to report payment history information for an authorized user married to the primary accountholder. For all other authorized users, it’s up to the card issuer to choose whether or not to report payment history information if the person is not married to the primary account holder. So, ask the card issuer if it will report the payment history on your boyfriend's credit report. Otherwise, he won't benefit.

Also, newer scoring models now diminish the score boosts authorized users enjoy. For example, VantageScore, a scoring model launched by all three major credit-reporting agencies in 2006, ignores authorized user accounts in score calculations. And, Fair Isaac’s FICO 08 reduces the extent to which authorized users listed on the accounts of ‘non-related’ people can inflate their scores.

So what if you add your significant other as a joint accountholder instead? As a joint accountholder, he would definitely be liable for the debt and also get credit for the payment history on his credit report.

Are you willing to risk your credit to help his?
It’s a hard thing to imagine when things are going great, but what would you do if your significant other charged something without your approval, increasing your debt load? Or, what if you’ve agreed to take turns making payments and he doesn’t keep his end of the bargain? His actions (or lack thereof) will affect your credit score just as if you skipped the payment yourself. Are you willing to risk the consequences of his actions on your credit, like having higher payments and/or having to take over all payments to avoid further damage to your credit rating?

Consider other credit-building alternatives
As an alternative to adding your significant other to your own credit card account, suggest that he open a secured credit card instead. These cards are designed to help people build a sound credit history if they’ve never had credit or if their credit is challenged. The way it works: a secured card offers a credit line that’s secured by a matching deposit in a savings account. The secured cardholder is then able to make purchases with the card, and is responsible for making monthly payments. Over time, the person’s credit score improves and he can possibly move on to the responsibility of an unsecured credit card.

When it comes to helping your significant other with his/her credit rating, there are options. Just be sure to give it much thought before you put your good name on the credit line.