How do Joint Accounts Affect Credit?

before this past year, i never had any type of credit. i couldnt even get a store credit card. in the past year, i was lucky to get a cell phone service without paying a deposit fee because the attendee waived that fee. also in the past year i opened up a joined credit account at a large retail store with another friend. my friend has an impeccable credit history. the sale we purchased at the store was merely a small amount to the amount he he was prequalified. even smaller after he received the cards in the and it showed his qualified amount. since then ive been able to get a credit card of my own. my question how does opening that joint account at the store help out my credit. from what i remember my friend prequalified at the time of opening the account, to something btw 2 and 5 thousand. when he got the cards, he qualified for $12,000. the first and only sale made on that account was less than 800 dollars, and we payed it off, in in a short time. i guess the question is, did my friends amount approval help me out? i did get notices from equifax when we opened the account and when we finished paying it. thank you for your time.

ANSWER:

Wil,

It is possible that being added as a joint cardholder to your friend’s credit card helped your credit in a couple ways.

First, if your friend has a good credit rating, then that gives yours a slight boost as well. Alternatively, if your friend stops making his payments on the card, it could damage your credit. The same goes in the event that you default on the card, in that it will have a negative impact on your friend’s credit. This method has been used for years by many people who need help with improving their credit. It is just difficult to find someone that will take on the responsibility of making a friend a joint card holder.

Additionally, since you and your friend only made a small purchase and paid it off, you now have a large line of open credit being reflected on your credit report. The amount of credit that is available and not used raises  your credit to debt ratio which is also a boost to your credit rating and makes you more appealing to other creditors.

Second, you went from having no credit to having credit when you were added as a joint account holder, which also assisted your credit rating. It is sometimes harder to obtain credit when you don’t have any than it is when you have bad credit.

There is a difference between becoming an authorized user and a joint account holder. Authorized users are usually provided a credit card and are able to use it, but sometimes this status isn’t reported to credit bureaus and doesn’t impact the credit score. Joint account holders are actually agreeing to being responsible for the debt jointly and in the event that one person defaults, the other is still responsible for the debt.

Just continue to make your payments and pay them on time, so that you don’t end up hurting your friend’s credit. It is an extremely kind and trusting gesture to add someone to a credit card as a joint cardholder.