How Do Authorized User Accounts Affect Your Credit Score and USDA Qualifying?
Do Authorized User Accounts Affect Your USDA Loan Approval?
Authorized user accounts are a little known fact that can cause hurdles, delays, and additional documentation in order to gain underwriting approval for a USDA loan. The video below will discuss the USDA guidelines for an authorized user account and what is needed to be approved for a USDA Home Loan.
First, what accounts are considered to be authorized user accounts?
Authorized user accounts are when an authorized user is able to use that account but is not legally liable for any balance owed.
Authorized user accounts can be a benefit to increasing a credit score, but are not a substitute for building your own individual credit profile. If the main account holder misses a payment or increases the balance, these could have an immediate negative impact on the credit score. Underwriters will want to see your own established credit history, not just the fact that you are an allowed user on someone else’s account.
What are the USDA loan guidelines for authorized user accounts?
USDA guidelines require that authorized user accounts reporting on the credit report are an accurate reflection of the overall credit history of the applicant. In cases when an applicant has an authorized user account listed on their credit report, the following must be documented to proceed under Automated Underwriting Guidelines:
- Another borrower on the application owns the account in question
- Owner of the trade line is the applicant’s spouse
- Evidence the applicant has been making payments on the account for the last 12 months
If this criteria is not able to be met the loan file will be downgraded and will be required to meet manual underwriting guidelines. Manual underwriting is a more intensive & time consuming review process as discussed in a previous post. Not all lenders offer manual underwriting, for further details on USDA manual underwriting make sure to contact us.
