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Opening Credits

How ‘authorized user’ status can help build US credit

Summary

New to the U.S.? There are several ways to start building a good credit history, most notably by becoming an authorized user on another’s credit card.

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Question for the CreditCards.com expertDear Opening Credits,
I have moved to the USA from the UK and been added to my partner’s credit card, which she has had since 2008. I assume I am an authorized user and have my own card with my name on it, as they did not take my Social Security number. Can I still build credit this way? If not, is there a way to build credit from being an authorized user and if so how? Thanks.  — Joe 

Answer for the CreditCards.com expertDear Joe,
What a warm welcome to America! You come here and — bam! — you have a credit card to swipe. What a country!

As far as the status of the account, your guess is almost certainly accurate. Many credit card issuers allow their customers to add other people as authorized users. The bank that issued your partner’s card wouldn’t have looked too deeply into your identity, financial situation and credit history because you’re exempt from liability. Your partner is the sole owner, and you are an honored guest.

But do you build a personal credit history while you’re an authorized user on the other person’s account? In most circumstances, yes.

Banks and credit card companies typically send the activity of shared accounts to all cardholders’ consumer credit reports. Once that information finds its way onto yours, a history is developed. The more good data that shows up, the better. If you or your partner use the card regularly, but keep the balance low and always pay on time, your credit file benefits. All that information is factored into a credit score, and the longer positive data is listed on your report, the higher your credit rating will grow. Eventually, when your score is high enough, you can apply for your own credit card or loan.

To know if the account is being recorded, you can contact the creditor and ask. You’ll see a toll-free number on the back of your card, so give it a call. If it’s tough to get a straight answer, you can go straight to the source instead. After being an authorized user for six months or more, go to AnnualCreditReport.com and pull your credit reports. It’s the one place online that you can access your reports once a year from each of the big three credit bureaus (Equifax, Experian and TransUnion) for free. Scan the trade line section and look for that account. If you see it, great.

However, if the account is not showing up, you won’t be building credit with it. You’ll have to take another approach to achieve your goal of credit establishment.

There are a couple of ways people who are not just new to credit but fresh to this country can begin a credit history. Maybe your friend will co-sign on a new card with you. I’m always hesitant to recommend joint ownership because both people are fully liable for the account and these kind of arrangements can get messy. Still, it’s an option.

Or you may consider a secured credit card. With these types of accounts, you put money down with the financial institution and they keep it as collateral. Qualification is usually more relaxed than for unsecured accounts. Check out the unsecured card deals available at CreditCards.com.

Now, as far as that authorized user card that you have, I urge you to respect it. Whatever you spend, your partner has the ultimate responsibility to repay. Overdo it and that lovely welcome mat could be yanked back with a phone call to the creditor, rendering the plastic in your pocket quite useless.

See related:New immigrant credit rules of the road

What’s up next?

In Opening Credits

When being an authorized user is useless

Her brother added her to his card to boost her credit, but the issuer doesn’t report card activity for authorized users. What are her options?

Published: August 7, 2013

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