Sunday, January 17, 2010

Authorized User Tradelines

We get questions all the time about how lenders view Authorized User Tradelines when they determine repayment ability or Debt to Income. I hope this helps.

DU (desktop underwriter) takes credit report tradelines designated as authorized user tradelines into consideration as part of the DU credit risk assessment. However the lender must review credit report tradelines in which the applicant has been designated as an authorized user in order to ensure the tradelines are an accurate reflection of the borrower's credit history.

If the lender believes the authorized user tradelines are not an accurate reflection of the borrower's credit history, the lender should evaluate the borrower's credit history without the benefit of these tradelines and use prudent underwriting judgment when making its final underwriting decision.

In order to assist the lender in its review of authorized user tradelines, DU issues a message providing the name of the creditor and account number for each authorized user tradeline identified.

When ensuring tradelines are an accurate reflection of the borrower's credit history, as a general guide, if the borrower has several authorized user accounts but only has a few accounts of his/her own, the lender should establish:

  • the relationship of the borrower to the owner of the account,
  • if the borrower uses the account, and
  • if the borrower makes the payments on the account.


If the authorized user tradeline belongs to another borrower on the mortgage loan, no additional investigation is needed. On the other hand, if the borrower has several tradelines in good standing and only a minor number of authorized user accounts, the lender could make the determination that:

  • the authorized user accounts had minimal, if any, impact on the borrower's overall credit profile; and
  • the information reported on the credit report is an accurate reflection of the borrower's credit history.


The lender is not required to review an authorized user tradelines that belongs to the borrower's spouse when the spouse is not on the mortgage transaction.



2 comments:

  1. Does not regulation B require spouse authorized tradelines to be considered in assessing credit?

    Mortgage companies should allow a person to specifiy or allow the lender to know who owns the authorized user account, in addition authorized user privileges may vary by account, for instance some AU's allow balance transfers, payments, and changing payment due dates, some may even have the AU acknowledge that he or she may be contacted about the account if the primary account holder doesn't pay (Amex).

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