5 things to know about authorized users building credit history
An authorized user does build credit history. As the authorized user on a credit card, that account is added to your credit reports. You build credit just like you would when you’re the main account holder. Here are five things to know about being an authorized user on a credit card:
1. How to get added as an authorized user on a credit card
You’ll need a trusted family member or friend to add you to their credit card account. Some credit card companies may have guidelines like age restrictions, but most don’t. You’ll just have to confirm with your credit card issuer. It’s usually a simple process and should only take a few days after the request is confirmed to receive your card in the mail.
2. What to consider before becoming an authorized user on a credit card
Before you move ahead with getting added as an authorized user, you’ll want to make sure you communicate about the details and expectations of paying the card. Both of you are impacted by the actions either of you take on the credit card since it shows up on both of your credit reports. Late payments and maxing out the card will usually cause your credit score to fall.
Should you add someone as an authorized user on your card?
On the other side of things, if you are considering adding someone as an authorized user on your credit card then you’ll want to make sure the person you’re adding will act responsibly with the credit card. Because you’re ultimately the one responsible for making the credit card payments. The person you add won’t be on the hook if they max out the card and leave you to foot the bill. So, consider it carefully before putting someone else on your account as an authorized user.
If you do add someone as an authorized user and they don’t pay the amount they spent, you’ll want to work to pay off the credit card debt as quickly as possible to minimize the impact on your credit score. If you worry you may fall behind on credit card payments, contact your credit card issuer and let them know your situation. They may be able to work with you to set up a payment plan. Contacting your credit issuer is always the best bet before you fall behind on making payments.
3. How being an authorized user impacts your credit score
You can work towards a good or excellent credit score with regular on-time payments as an authorized user on a credit card. However, just like accounts you hold on your own, if you make late payments then your credit score will likely drop.
If you have little or no credit history, becoming as an authorized user is one way to build your credit history. It helps you work your way up and raise your credit score. (Learn more here about how to build credit fast.)
Regularly paying the credit card bill on time and not using too much of your available credit are both still important, just as they are when you have your own credit card. Payment history and credit utilization (the amount of credit you’re using compared to your credit limit) are the two biggest factors of most credit scores, including the FICO® Score and VantageScore. Those are the two of the most common credit scoring models.
However, being an authorized user isn’t the only thing that impacts your credit score. You still want to make sure that you pay any loans and credit cards on time as well. Applying for too many credit cards or loans in a short period of time will also likely cause a small drop in your credit score.
4. Understanding authorized users vs. cosigners vs. joint account holders
There are a few different types of accounts that can have two or more names on them. How these accounts impact your credit vary.
Comparing types of credit users
|Authorized User||Cosigner||Joint Account Holder|
|Overview||You can use someone else’s credit card.|
However, you’re not the primary account holder
|Someone who applies for a loan with you and agrees to pay off the debt if you do not make payments||Two users share joint responsibility for a credit card, loan, or another financial account|
|How to become one||The primary account holder adds you to their credit card account as an authorized user||A cosigner applies for and signs off on the loan with you when it’s issued||You must apply for the credit card as a joint applicant, meeting all lender requirements|
- You can use the credit card just like it’s your own
- Authorized users build credit
- You aren’t legally responsible for the credit card payments
- Usually doesn’t involve a credit check
|You may be able to qualify for a higher loan amount or lower interest rate with a cosigner (or you may qualify for a loan you wouldn’t otherwise get without a cosigner)||Both parties get the same credit limit and full benefits as account holders|
- You can’t make changes to the account
- Late payments or high credit usage will still show on your credit report
|A cosigner is legally responsible if the other party defaults on the loan||The pro can also be a downside — you’re legally responsible for the debt on the account if the other holder doesn’t pay|
|Common Uses||A parent adding a child as an authorized user||A parent, spouse or family member cosigning a loan for someone who has poor credit, little credit, or no credit history||Spouses share a credit card as joint account holders|
5. Most credit card issuers report authorized users… but not all
All major credit card issuers report authorized users to the credit bureaus along with the primary account holder. Credit card issuers aren’t required by law to report to each of the three major credit reporting agencies – Equifax, Experian, and TransUnion – though most do.
However, if your credit card is issued by a local bank or credit union then you may want to confirm which credit bureaus they report activity to each month. That way, you can ensure that using the account as an authorized user will help your credit reports.
Being an authorized user can help you build credit if you use the credit card responsibly and ensure the bills are paid on time. Visit our Credit FAQs for more information on successfully managing your credit.
Article last modified on February 25, 2019. Published by Debt.com, LLC .