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November 16, 2012

Dave Ramsey: Authorized users don’t help your credit

NEW CASTLE — Dear Dave: My brother asked me to put his name on my credit card as an authorized user. He said it will help improve his credit score. Is this true, and would it help my score in any way? — Anna

Dear Anna: Your brother is wrong. It will not improve his credit score at all. As an authorized user, he is not the owner of the debt. There’s a high likelihood that it will affect your credit score in a negative way, though, because there’s a good chance he’ll do some dumb things with your card.

Look at it this way. Why would someone give him credit, or raise his credit score, just for using your credit? It doesn’t make sense. Your credit score is affected by things like whether or not you pay your bill on time. The card isn’t in his name, so really all this amounts to is him having fun with your card, and you’re the one who’s liable for the damage. The truth is that authorized users shouldn’t even show up on a credit report.

It sounds like your brother has some financial problems. While I admire the fact that he wants to fix things, this is not the answer. Don’t misunderstand what I’m saying, Anna. Chances are he’s not trying to con you. He probably just got some bad information. But the hard truth is this: If you go along with his idea, it’s not going to help him, and it’s going to hurt you. Don’t do it. — Dave

Dear Dave: In terms of a family’s financial plan, when is it OK to purchase something like NFL season tickets? Is this the kind of thing that should wait until you’re debt-free and can afford to pay cash for them? — Greg

Dear Greg: Absolutely, you should wait until you’re debt-free and can pay cash. That kind of thing is a prime example of an expensive, luxury purchase.

I’m an NFL season ticket holder for the Tennessee Titans. But I’ve been debt-free for years, and my family’s financial future is very secure. Whether the Titans win or lose, or whether I watch the games in person or in front of the television, has no impact on their security. However, if you’re sitting there with credit card debt, a car payment and living paycheck to paycheck, you’ve got no business buying season tickets. Get yourself out of debt, build an emergency fund, and make sure your family is taken care of first. Then you can have some fun. Live like no one else so that later you can live like no one else. And then, if that includes season tickets to your favorite football, baseball or hockey team, have a blast.

Remember, this kind of thing is entertainment. I know a lot of silly people out there act like whoever wins a football game is a matter of life and death, but it’s just a game. Your life and your financial future are not games, and they’re not things to be taken lightly. First things first, Greg. There will be plenty of time for that kind of fun when you can afford it! — Dave

(For more financial advice please visit daveramsey.com.)

 

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