If you’ve had credit problems in the past, you know it can take awhile for those credit blemishes to come off of your credit report.
If you’re anxious to bring up your credit score and don’t want to wait months or years to watch those numbers go up, there are a few things you can to to accelerate the process. One of the actions you can take is to become an authorized user on another person’s credit account.
Learn how becoming an authorized user can help add points to your credit score and how to do it.
What Is an Authorized User?
An authorized user is someone listed on the credit card account of a primary account holder who has the ability to conduct transactions on their own.
The authorized user receives a card with their own name which they are able to use to make purchases just like the main account holder, but they do not have all of the same account permissions.
For example, an authorized user isn’t able to add others to the account, request changes to the credit limit, or close the account.
The main account holder is ultimately responsible for the account. If an authorized user charges something to an account but does not make the agreed payments, the main account holder is on the hook.
How Does Being an Authorized User Help Your Credit Score?
One of the main reasons that someone might want to be an authorized user, or allow someone else to be an authorized user on their account, is to help the authorized user build their own credit.
Does that work? Yes. It does. When someone is an authorized user on another person’s account, that account history is generally added to their own credit report. However, it doesn’t hurt to have the primary account holder make sure that the credit card company is reporting it.
Becoming an authorized user works better in some situations than others.
The biggest boost likely comes if the account has a very low credit utilization rate.
For example, suppose the credit card has a $20,000 limit but only carries a small balance of $500. That is a 2.5% usage rate which is considered very good by credit bureaus that calculate your score.
Before you add an authorized user to your account to give them a credit boost, consider why their credit is low in the first place.
Late payments
If the potential authorized user has low credit because they have a string of recent late or missed payments, then adding them to your account isn’t likely to help them as much.
A negative credit history will still weigh them down until enough time has passed.
Building credit
This works much better for someone who is simply new to building a credit profile and doesn’t have much of a credit history on their report.
Often, this is a good strategy for parents wanting to help their children get a jumpstart on building their credit as they enter into adulthood.
Cleaned-up credit
This can also work well for someone who has already cleaned their credit up — sufficient time has passed since they’ve missed payments or been dinged for paying late — but they could use a little nudge to bump their score up.
You may also be able to build your credit score by applying for a personal loan with a co-signer. Compare the best personal loan rates and find ones that allow borrowers to use a co-applicant.
How to Become an Authorized User
To become an authorized user, you need to have the primary account holder add you.
To do this, they generally need to contact their credit card company and request for them to add you.
This might be done through an online portal if their credit card company provides that capability. Otherwise, they may need to call or physically go to the bank or institution that issued the card.
How Becoming an Authorized User Works
Once you are added to someone’s account, it’s largely up to the two of you to decide how the arrangement will work.
As far as the credit card issuer is concerned, you simply have the ability to spend on the account, and will look to the main account holder for payment.
You may find that it makes sense to set up an informal payment plan with the main account holder if you plan on actually using the account.
Pros and Cons of Being an Authorized User
There are several pros and cons of being an authorized user on someone else’s credit card account.
Pro: Building your credit
The largest benefit and most common reason for being an authorized user is the ability to get help building your own credit.
When you become an authorized user, you adopt the information from that account and it becomes part of your own credit profile as long as the credit card issuer is reporting that information.
Pro: No Approval required
If you are otherwise unable to get approved for a card based on your own credit, becoming an authorized user might be your best option to start building your credit.
Because the primary account owner is ultimately responsible for every charge on the account, the credit card issuer has a lot less liability.
That makes it much easier to be added to someone else’s account rather than open your own credit card.
Pro: Consolidated activity
If two people share the same account, then there are fewer accounts to sync.
Spouses who have consolidated finances and want to use a single account might find this to be a convenient option.
Con: It doesn’t provide as much of a boost as having your own account
While becoming an authorized user can help build your credit, it isn’t quite the same as having your truly own credit profile.
Lenders may not view an account for which you are an authorized user quite the same as one for which you are the sole or primary account holder.
That’s because when you are an authorized user, there is someone else backing you up and taking responsibility.
Lenders may want to see that you can handle credit responsibly without that support.
Con: You’re depending on someone else
Although you should pick a responsible person to add you as an authorized user, mistakes can happen.
If the primary account holder misses payments or pays them late then that information will end up on your account too.
You can of course cover those payments or make them on behalf of the primary account holder, but that is something you want to avoid.
If they don’t tell you that they are having trouble making payments, you may not realize it before the damage is done anyway.
Con: You are responsible for someone else
If you add someone as an authorized user to your account, then you are incurring some risk.
If the authorized user puts charges on your account then you are ultimately responsible for making sure they get paid.
If the authorized person doesn’t follow through then you may end up with a larger bill than you can pay.
One way to avoid this with someone that you want to help out is to simply not give them the card with their name on it.
The credit card issuer will mail that to you so you can just keep it.
Dos and Don’ts of Becoming or Adding an Authorized User
While becoming an authorized user can help boost your credit score in certain cases, you need to make sure you’re going about it the right way. There are some dos and don’ts to be aware of.
FAQs
Will it hurt the main account holder’s credit to add an authorized user?
No, the act of adding someone else as an authorized user won’t hurt the main account holder’s credit.
However, their spending habits after the fact might. It’s very important to monitor your account and make sure that they don’t run up a bill that you can’t cover.
If the main account holder stops paying their account, will I be liable for the payments?
The authorized user is never liable for the account. Only the main account holder is ultimately responsible.
How much will my credit score go up if I become an authorized user?
Exactly how much it will help your credit is different for each person in each situation. Some see their credit score go up very little, while others may see a large increase. It largely depends on why your credit score is low to begin with.
Does an authorized user get their own card?
Yes, an authorized user will usually get their own card.
However, it is sent to the main account holder who must then make sure that the authorized user actually receives it if they choose to.
Is an Authorized User Different From a Joint Account Holder?
Authorized users are very different from joint account holders. Joint account holders have the same rights, access, and responsibility as the main account holder — in fact, they are one of the multiple main account holders.
Authorized users are not the main account holders and do not have the same rights, access, or responsibilities.
