Does Being an Authorized User Help You Build Credit?

When you’re just starting to build credit, every little bit helps. Getting added to someone’s credit card account can give you a boost that could, in a short period of time, make the difference between a secured and unsecured credit card. That’s a huge difference! The catch: This easy technique doesn’t work for everybody.

While asking someone to add you as an authorized user to his or her credit card account might sound like a no-brainer, that’s often not the case. You might think there is no risk in it for you—in the end, it’s the other party that’s left holding the bag, should you fail to pay your bills—but you would be wrong. There are risks involved for both parties. So think carefully before adding yourself to a credit card account.

By being added as an authorized user, you’re inheriting the primary account holder’s credit habits.

The first, and most important, thing to look for: whether the account holder pays his or her bills on time. It’s not enough that you are paying like clockwork—credit card issuers do not necessarily distinguish between your account and the one of the account holder. It doesn’t take much or long to get your credit score dropped. Credit card issuers report late payments to credit bureaus without fail.

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And late payments, as bad as they are, are not the only thing that can hurt you. If the account in question has a high utilization rate, that also weighs heavily on the FICO® Score[1].

So it’s best to do your own due diligence. Only ask for the ride if the driver is sober and reliable. Otherwise, instead of improving your credit, you might find yourself achieving exactly the opposite.

And then, there is even more to consider.

Not all credit card issuers report authorized users’ activity to credit bureaus, and those that do might not report it in the same way.

No one can make a credit card issuer report any kind of activity to credit bureaus, which means they are free to report whatever they want. You can ask a primary account holder to add you to his or her account only to find out later—to your dismay—that it hasn’t done a thing to improve your credit score.

According to a poll conducted by Nerdwallet[2], two major U.S. credit card issuers do not report authorized users’ activity at all, three issuers report to all three bureaus, one issuer reports only positive information, and two issuers—including Discover—report authorized users’ activity differently from that of the account holder. So make sure that being added to someone’s account actually does something to build your credit.

[1] http://www.myfico.com/crediteducation/whatsinyourscore.aspx

[2] http://www.nerdwallet.com/blog/tips/credit-score/credit-card-authorized-users-build-credit/

 

Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.

FICO is a registered trademark of the Fair Isaac Corporation in the United States and other countries.

Discover Financial Services and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Discover Financial Services and Fair Isaac do not provide “credit repair” services or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating. 

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