One area that often creates confusion is authorized user tradelines and how they impact your debt-to-income (DTI) ratio. If you’re a Michigan homebuyer using FHA financing, here’s what you need to know.
What Is an Authorized User Tradeline?
An authorized user tradeline is when you are added to someone else’s credit account, such as a credit card, but you are not legally responsible for the debt. While this can help boost credit scores, FHA guidelines treat these accounts carefully when calculating your qualifications. FHA requires lenders to include the monthly payment from an authorized user account in your debt-to-income ratio unless specific conditions are met.
- You are listed as an authorized user on the account
- There is no proof showing who has been making the payments
- The account is newly established (less than 3 months old)
When the Payment Can Be Excluded
There is one key exception that can work in your favor: If this can be verified, the monthly payment does not have to be counted against your DTI.
- Documentation shows that the primary account holder has made all payments for the most recent 12 months
FHA guidelines must be applied correctly, especially when it comes to credit and DTI calculations. If you’re planning to buy a home in Michigan and have questions about your credit or qualifying, we’re here to help. Reach out to get pre-qualified.
