Authorized users: Everything you need to know
One of the best ways to quickly give your credit score a boost is becoming an authorized user on someone else’s credit card. This is a solid method for building credit, whether you’re looking to establish a credit history, rebuild your credit or raise your score — but it also comes with a lot of responsibility.
To become an authorized user, you’ll need a friend or family member to agree to add you as an authorized user on their credit card. This is also a common method for parents to help their children build credit early.
Here’s more about how you can improve your credit as an authorized user.
What is an authorized user?
An authorized user is someone who has permission to use another person’s credit account.
Authorized users receive a credit card that is connected to the primary cardholder’s line of credit. Any purchases you make on your authorized user card will be added to the primary cardholder’s credit card balance, and the primary cardholder will be responsible for making on-time payments against that balance.
Becoming an authorized user can help borrowers with poor credit or a short credit history start building a positive credit history. It can also be a convenient way for families and members of the same household to streamline spending and payments.
Pros and cons of being an authorized user
As an authorized user, you can use your connected credit card to make purchases, but the card also has the potential to help boost your credit score, because payments may be recorded on your credit report. Make sure to check whether or not the card issuer will report data to the three credit bureaus for authorized users before you sign up. Not all credit issuers report authorized users to the three credit bureaus, so your authorized user account might not become a part of your credit history. However, in most cases, your authorized user account will show up on your report and affect your score.
Here are some of the main benefits of becoming an authorized user:
May improve your credit score. You may be able to boost your credit score through a history of on-time payments and responsible borrowing.
Convenient for families. Adding a partner or spouse, parent or child as an authorized user can give them access to your line of credit and streamline family expenses.
Boosted rewards potential. With multiple people spending on the same credit account, you can potentially earn a lot more credit card rewards.
Free to add. There’s usually no additional charge to add an authorized user to an account.
How significant the impact of becoming an authorized user is on your credit depends on your current score and the primary cardholder’s borrowing behavior. For instance, if you have several late or missed payments on your credit report, being added as an authorized user to a card where the primary cardholder makes on-time payments each month could boost your score. Similarly, being added as an authorized user could help you to decrease your credit utilization and improve the age and mix of your accounts.
However, there are some things that an authorized user can’t do. The authorized user cannot make changes to an account, like requesting a credit limit increase or adding other authorized users. When it comes to spending power, the primary cardholder can set a limit on the amount of money an authorized user is allowed to spend. The primary cardholder is also the only one responsible for paying off the balance on the card — which means you’ll need to choose someone trustworthy if credit building is your goal.
Here are some of the cons of adding an authorized user:
The primary cardholder’s credit could be impacted. If an authorized user racks up a high balance, that could hurt the primary cardholder’s credit utilization ratio, which makes up 30 percent of a FICO credit score.
The authorized user’s credit could be impacted. Likewise, the primary cardholder’s behavior also reflects on an authorized user. Poor payment habits and unwise spending by the account holder could have a negative impact on an authorized user’s credit.
The primary cardholder is responsible for the balance. Whatever the authorized user spends, the cardholder is responsible for paying back.
Less control over spending. With two people using the same account to make purchases, balances can add up fast.
How to add an authorized user
The process of adding an authorized user depends on the specific credit card. In some cases, the primary cardholder may be able to add an authorized user online or through their bank’s mobile app. In other cases, they may have to give the bank a call. It’s also possible to add an authorized user when you open a new credit card account. You’ll generally need to provide information like the authorized user’s name, date of birth and Social Security number.
How to remove an authorized user
You can usually remove an authorized user online or over the phone. Once you complete the process, it’s a good idea to send your credit card issuer a certified letter confirming the agreement to remove the authorized user from your account. You should also collect the credit card from the authorized user to ensure they can no longer make charges against your credit account.
Removing an authorized user from your credit card account may impact the authorized user’s credit score. For example, if your parent added you to their credit card account as an authorized user as a teen and it’s your oldest line of credit, closing the account could temporarily drop your credit score. This is because credit history length makes up 15 percent of a FICO credit score. So if being added as an authorized user helped to improve a user’s credit score, then being removed could affect their score, too.
The bottom line
Becoming an authorized user is just one way to potentially raise your credit score or establish credit history — but it requires a certain level of trust betweent both the authorized user and the primary cardholder on the account. The liability falls entirely on the primary cardholder because they are responsible for payments at the end of each billing cycle. That’s why it’s important for authorized users to practice good financial habits, like mindful spending.
