Does Being an Authorized User Impact Your Credit Score?
There is no simple answer to this question, but we’ll break down everything you need to know in an easy to understand way. When you’re just starting to build your credit, every bit of help matters. For instance, getting added to someone else’s credit card account can give you a boost that could, in a short period of time, make the difference between your having to apply for a secured or an unsecured credit card. But there’s a catch: This approach doesn’t always work for everybody.
Asking someone to add you as an authorized user to his or her credit card account might sound like a no-brainer; unfortunately, that’s often not the case. You might think there is no risk in it for you, and it’s the other party that will be liable for paying the credit card account. In fact, there are potential risks for both parties. So, think carefully before becoming an authorized user on another person’s credit card account.
What do I need to know about being an authorized user on a credit card?
If your credit history is slim, you can sometimes build credit history with responsible use by being added as an authorized user on someone else’s credit card.1 With responsible use, including on-time payments, your credit history reported to the credit bureaus can indicate that you are someone who might use credit wisely. Conversely, with irresponsible use, such as missed payments, you run the danger of damaging your credit score.
How old do I have to be to become an authorized user?
There is no set age, but often people under 18 can be added as authorized users on their parents’ accounts. Authorized users receive their own credit card that they can use to make purchases. However, it’s worth noting that the primary account holder is responsible for making all payments toward the card’s balance.
By becoming an authorized user, am I inheriting the primary account holder’s credit habits?
Before you consider becoming an authorized user, the first, and most important, thing to look for is whether the primary account holder pays their bills on time. If they do not make timely payments, that gets documented on the credit reports of authorized users. And credit card issuers report late payments to credit bureaus.
So it doesn’t take much to begin to negatively impact your credit score. What’s more, late payments, as bad as they are, are not the only thing that can hurt you. If the account in question has a high credit utilization rate, that too can weigh heavily on your credit score.
So before signing on to be an authorized user, it’s best to do your own due diligence by evaluating the credit habits of the primary account holder. Otherwise, instead of working to build a positive credit history, you may find yourself achieving the opposite.
What’s the bottom line?
Becoming an authorized user can be a way to build a credit history with responsible use, but there are risks should the strategy not go according to plan. Your best bet is to evaluate the primary account holder — do they make timely payments each month? — and find out if the creditor reports authorized users’ activity to the major credit bureaus. Not all of them do, and it’s important that you know this information before taking a step that may not serve you in the long run.
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