Adding or becoming an authorized user can affect your credit in positive or negative ways.

3 minute read

Are you thinking about helping a friend or relative build or improve credit by adding that person as an authorized user on your credit card? Or, maybe you’re the one looking to improve your credit by asking a primary cardholder to add you as an authorized user on the account.

Either way, before you take the authorized user route, make sure you know exactly where you’re headed. There are important pros and cons to being or adding a credit card authorized user.

Below are seven things to know before adding or becoming a credit card authorized user.

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1. Authorized users receive a card of their own

When you become an authorized user on someone else’s credit card, you may receive your own card for the account with your name on it. Just like the primary cardholder, you can make purchases with the credit card as long as those purchases stay within the card’s credit limit. However, the primary cardholder is responsible for making payments.

If you’re the primary account holder considering adding an authorized user, make sure the person is responsible and agrees to limits you may personally impose on spending before adding as an authorized user, since you are the one responsible for paying the statement balance.

Find out: How Do Credit Cards Work?

2. The primary cardholder is fully responsible for payment

Only the primary cardholder, not the authorized user, is responsible for making timely payments on a credit card that has an authorized user. Of course, the authorized user should pay the primary cardholder if that’s the agreement between the parties, but no one can legally force the authorized user to pay.

So, if you’re the primary account holder and your authorized user turns out to be a deadbeat who misses or stops making payments, you’ll still be on the hook for the balance.

Find out: 6 Ways to Build Credit When You Have No Credit History

3. Becoming an authorized user can help your credit

If you have little or no credit history, becoming an authorized user on someone else’s credit card can help build credit history and improve your credit. That’s because if the card issuer reports to major credit bureaus, the account merges with your own credit, appearing as a new account on your credit report.

To benefit most from becoming an authorized user, major credit bureau Experian recommends choosing an account where the primary cardholder has a perfect payment history and a low credit utilization rate, which is the percentage of revolving credit owed to the amount of credit available.

What’s a good credit utilization rate? Experian recommends keeping the ratio below 30%.

Find out: How to Build Credit on Your Own for Free

4. Adding an irresponsible authorized user could hurt your credit

Before you add an authorized user to your credit card, make sure you know that person well. Does he always pay his bills on time or does he have a history of missed car payments? Just like credit card companies look at payment history, so should you, since you’re the one who has to make payments directly to the card’s issuer.

If an authorized user doesn’t pay you what he or she owes or goes on a spending spree and runs up such a huge balance, as the primary account holder, you’re still the one responsible for paying. And if you have trouble affording monthly payments or paying the balance off, your credit could suffer.

Find out: What Has the Biggest Impact on Your Credit Score?

5. An authorized user’s prior credit problems won’t affect the primary cardholder’s credit

If you add an authorized user to your credit card, your payment history — for that credit card account only — will show up on that person’s credit report, potentially helping their credit. But that person’s payment history won’t show up on your credit report, which is a good thing, especially if you’re trying to help someone rebuild their credit after having a poor payment history or declaring bankruptcy.

Find out: When Should I File for Bankruptcy?

6. Choose your primary cardholder wisely

Just as the primary cardholder needs to consider an authorized user’s history of financial responsibility, before you are added as an authorized user to another person’s credit card, make sure the primary account holder is financially responsible.

That’s because if the primary account holder misses a payment or maxes out the card, your credit could be negatively affected, according to Experian.

7. Not all creditors report authorized user accounts

If you’re trying to establish credit history or improve your credit by becoming an authorized user on another person’s credit card, first make sure that the card issuer will report the account’s activity for both parties to major credit bureaus.

Most creditors report authorized user accounts to major credit bureaus, but that’s not always the case, according to Experian. If your purpose is to improve your credit by becoming an authorized user, contact the credit card issuer to find out whether it reports authorized user accounts.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC