Key takeaways
- The primary cardholder will be responsible for the charges made on an account that has an authorized user.
- Whether or not being an authorized user affects your credit (and how it affects it) depends on if the lender reports authorized user activity to credit bureaus and how responsible both parties are with the card.
- Should the main cardholder start to utilize the card irresponsibly, authorized users can look into removing themselves from the account.
There are numerous strategies to enhance your credit score. You can consider opening a secured card, exploring alternative credit scoring methods, or maintaining your current credit accounts, paying off any outstanding debt, and observing your score improve as the age of your credit increases.
Alternatively, you have the option to become an authorized user on someone else’s credit card.
An authorized user is an individual who has the ability to make purchases on another person’s credit account. Commonly, partners and spouses add each other as authorized users on their credit cards, and parents may add their teenage children as authorized users to assist them in building a credit history and learning responsible credit usage.
Authorized users receive credit cards linked to the primary cardholder’s line of credit, yet they are not held responsible for repaying the charges made on those cards. The primary account holder is entirely responsible for all charges on the card.
In essence, if you designate someone as an authorized user on your credit card and they accumulate a substantial debt, you are ultimately accountable for settling your credit card debt.
Does being an authorized user affect your credit?
Being an authorized user can impact your credit positively, negatively, or not at all. Two key factors determine the impact:
- Whether the lender reports authorized users to credit bureaus
- Whether both parties use the shared account responsibly
For an authorized user account to influence your credit, the lender or credit card issuer must report that account to the three major credit bureaus (Equifax, Experian, and TransUnion). If the lender does not report activity from authorized user accounts to the credit bureaus, those accounts will not affect your credit score.
Authorized user accounts must be visible on your credit report to impact your credit score. Once the lender begins reporting this information to the credit bureaus, you may notice changes in your score within approximately 30 days.
Subsequently, the authorized user account can benefit your credit score as long as both parties handle the account responsibly. Timely payments made by the primary account holder can positively impact your credit score. Conversely, if both parties accumulate a high revolving balance, it may negatively affect both credit scores.
Building credit as an authorized user
An authorized user builds credit when the primary account holder maintains responsible credit habits, such as making on-time payments and paying off balances in full.
Keep in mind:
If the credit account holder is not using the credit card responsibly, you might want to remove yourself as an authorized user from the card.
You can also build your credit by obtaining at least one credit card in your name alongside your authorized user card. A secured credit card is a great option for building credit. By providing a small deposit, you can receive a small line of credit. Upon demonstrating responsible credit card usage, you can recover your deposit and receive a credit line increase. Check out our recommendations for the best secured credit cards.
If you prefer not to get a secured credit card, you can explore our top choices for credit cards designed for individuals with poor credit. While these cards may have higher interest rates and fewer rewards compared to cards for those with good or excellent credit, they serve as viable options for individuals seeking to enhance their credit scores.
The risks of being an authorized user
There are inherent risks associated with being an authorized user.
Initially, bear in mind that being an authorized user may not impact your credit score at all. For a credit account to affect your credit score, it must be reported to the credit bureaus. If your credit card issuer does not report authorized user activity to any of the three credit bureaus, your credit score will remain unaffected.
If the issuer does report it, being an authorized user can either benefit or harm you, as your score becomes linked to the habits of another individual. Relying on someone else’s credit card account can backfire if the primary cardholder makes late payments or accumulates a significant balance, for instance.
If being an authorized user starts to have a negative impact on your credit, you have the option to remove yourself from the arrangement. Often, a simple phone call or online request to the credit card issuer is all it takes to disassociate yourself from the account.
Graduating to primary cardholder
As you embark on your credit journey as an authorized user, it’s essential to establish specific goals before proceeding. One of these goals should be your exit strategy. While you probably do not intend to remain an authorized user indefinitely, this period presents an excellent opportunity to learn how to use credit responsibly. By assuming the responsibilities of an authorized user, you are building sound credit habits and establishing a credit score that can work to your advantage when you are prepared to advance to the next level.
When you feel prepared to progress, ideally within one to two years, consider applying for your own starter credit card. By this point, you should have a credit score that qualifies you to become the primary cardholder on your next card. Explore our recommendations for the best starter credit cards.
You might be wondering if removing yourself as an authorized user impacts your credit. In short, it could potentially affect your credit. If the credit account from which you are disassociating is your oldest line of credit, your credit history may shorten as a result. Since the length of your credit history constitutes 15 percent of your overall FICO score, there may be an impact. However, you can mitigate this impact by promptly applying for a credit card. Ultimately, your payment history holds greater significance in determining your overall creditworthiness than the length of your credit history.
The bottom line
Becoming an authorized user can aid in building your credit history and boosting your credit score, but it should not be your sole credit-building strategy. It is advisable to acquire credit cards in your name and practice responsible usage to witness gradual improvement in your score over time.