Differences between authorized user and joint account holder

Parents will oftentimes open up a new credit card in order to help their adult children gain access to credit. When starting a new account, it's important parents make sure they're setting their son or daughter as an authorized user and not a joint account holder. Selecting the wrong option may cause their college-aged child to have bad credit down the road.

In a recent report from New Jersey news provider the Star-Ledger, a mother says she listed her daughter as an authorized user on her credit accounts so her adult child could have access to funds. However, her daughter, now in college, was recently denied a student credit card because her credit report included her mother's past financial troubles.

The news source said the first step in rectifying the situation is to ensure that the daughter was registered as an authorized user and not a joint account holder.

If she's listed as an authorized user, then she may be able to dispute any negative marks on her credit report that stem from her mother's poor credit history.

The daughter may want to contact a credit repair company to help her investigate and dispute the unfair items. In many cases, a credit lawyer may be able to show that the reporting from the credit companies involved did not comply with federal laws and guidelines, which means they are required to remove the questionable items from the person's credit report.

Taking these steps may mean the difference between securing a credit card or being denied.