Adding someone to your credit card account as an authorized user can help them build or rebuild their credit. You also need to protect your own credit along the way since an authorized user isn’t liable for any charges or balances.
However, this approach doesn’t always work for everybody. Continue reading to see how you can become an authorized user or how it can help your credit score.
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Why Become an Authorized User on a Credit Card
Before we get started, if you don’t what an authorized user is a person who is added to the account of the primary credit cardholder, for example a family member, which allows for the existing credit information to be reported to credit bureaus using your name.
This can start helping you establish your credit.
1. Raise your credit score as an Authorized User
When you’re an authorized user, you are allowed to charge money to the primary holder’s card as if it was your own. So how will this help you with your credit?
For instance, the credit account you decide to use will show up on your report , this allows you to build a credit history. As long as you spend your money wisely and reimburse your part of the bill when it comes to pay your monthly balance fee. Make sure you make payments for the credit card on time and this can help positively affect your credit score.
2. Get instant credit history
You’ll get the entire history of the account showing up on your report once you’re an authorized user. So when an older credit account is added to your credit history, you can potentially grow your credit score since a report will show an increase of the average age accounts you are managing.
3. Not responsible for account holder’s activity
Because you’re an authorized user on a credit account, you won’t be liable for negative balances or charges. Plus the credit card provider won’t ask you to cover payments owed.
Authorized users can also back out at anytime and have their names removed from the accounts, if they see the primary cardholders are irresponsible since this can negatively impact your credit score.
4. Account holders not affected by authorize user’s credit history
When you add an authorized user, they are not liable for the primary user’s credit behavior and you’re not liable for their past credit history.
But an authorized user’s spending behavior might have an indirect effect on your credit if they run the bills and not helping you pay, so make sure you take in consideration who you sign on.
How Adding an Authorized User Affects Your Credit Score
If you’re a primary cardholder and are interested in adding an authorized user to your account, make sure you know what you’re signing up for.
Account holders hold full responsibility
Just know that when you add an authorized user, it is the account holder’s legal responsibility to make sure payments are made. They are not liable for any charges or balances on your account.
If you add someone to your account and they use your card to pay, it’s the primary cardholder’s responsibility to pay off the credit card company even if the authorized user pays you back or not.
You can hurt an authorized user’s credit score
A primary cardholder’s action can affect the credit score of the added authorized user. So if you maxed out your credit card or fallen behind on payments, you can hurt their credit score in addition to your own.
Credit Tips for Authorizing a User
- If you’re considering to add an authorized user to your account, make sure you set up a reimbursement schedule. You can choose to have your authorized user pay you directly or if you trust them to have online account access, you can also have them pay their portion of the card’s balance each month.
- If you’re a little hesitant about an authorized user using your credit card, you can still decide to add them to your account so they can benefit passively. When you add their name as an authorized user, they can raise their credit score even if you don’t give them a card or permission to charge anything to the account. However, make sure that you keep up with the payment because if you don’t, you’ll be doing more harm than good to their credit score.
- If you’re an authorized user on an account think of it as a training wheel for the actual thing. So after you’ve spent a year or two on another person’s account, you will want to apply for your own credit card.
Becoming an authorized user on someone else’s credit card account can help certain people improve their credit quickly. Not only that they can also help build a credit history, but there are risks that you should be aware of.
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