Becoming an authorized user on someone else’s credit card can help you strengthen your credit score. But you need to make sure the primary cardholder is a responsible credit user who pays the bill on time.
Of all the factors contributing to credit, the one over which you have the least control is the age of your credit. After all, just like your actual age, the age of your credit can only be as old as it is. However, “least” control does not mean no control. Becoming an authorized user might be able to help you strengthen this component of credit scoring.
What’s the difference between being an authorized user and a primary cardholder?
Becoming an authorized user on someone else’s account simply means that the credit card issuer has been contacted by the primary cardholder or account owner asking that you be added to their account. You usually receive a card with your name on it.
It is the primary cardholder who has a contract with the credit card issuer, not an authorized user. The issuer will always look to the primary for payment and almost all changes to the account.
It’s important to make sure you get added to an account that is in good standing – meaning that those first two factors of credit scoring are being handled responsibly by the primary cardholder. This is because their payment history and credit utilization (as well as the other lower impact scoring factors) will now become part of your credit file. So, your ideal candidate would have a card with a long, pristine payment history and a low balance in relation to their credit limit.
If you find that the card is not being handled responsibly and is bringing your score down, you can generally ask the issuer to remove you from the account as an authorized user. Experian will automatically remove an authorized user account from their credit report if it turns negative. Other bureaus currently do not. So, if you are an authorized user, monitor your TransUnion and Equifax credit reports more frequently in case the account owner runs into financial issues.
Once you have been removed, the card will no longer factor into your credit score. Be advised, though, that does include your credit age, so removing yourself will shorten your age, according to Experian.
But if the account isn’t in good standing, you are better off losing that portion anyway. No one benefits from negative information on their credit report. If you’re new to credit or starting over again after a divorce or bankruptcy, you must be extra careful to avoid having negative information on your credit report, especially when it’s through no fault of your own.
[graphi_callout]Make sure your lender adds authorized user reports to the credit bureaus. Not all do. If there is no reporting, there is no scoring boost.[/graphi_callout]
Who will benefit most from being an authorized user?
Those new to credit or those starting over after bankruptcy will benefit the most from being added to a mature account that is in good standing. This is why parents often add children to their credit cards as authorized users. But you don’t have to be related to the primary cardholder to be added as an authorized user.
Either way, it is a good idea for both parties to agree from the beginning on how the card can be used by the authorized user and how it will be paid. Remember, the card issuer is dealing with the primary cardholder, and that is who they will look to for payment. Your payment arrangements will be between you and the cardholder, not you and the card issuer, which can generate stress in a relationship.
For example, when a card is billed, the statement goes to the account owner, who has the sole responsibility to pay it. The account owner then has to ask the authorized user for the payment. If you owe the primary account holder more money than you are comfortable paying at the time or there are disagreements about when you’ll pay the authorized user, it can result in hard feelings.
To avoid this scenario, it is essential that the owner and user clearly understand what is required and how the arrangement will work. You can put your agreement in writing. You don’t need the agreement to be enforceable in court, it just has to clarify what might be misunderstood, misheard or assumed, especially if you are unfamiliar with credit.
For someone just looking to boost credit, I recommend that a primary cardholder add them to the account but not give them a card. The authorized user gets the benefit of a good account history without the drama of having the owner becoming a de-facto creditor. Although they won’t have access to new credit, they will get a scoring boost. And that’s what this is really all about.
If you already have enough information to generate a credit report, chances are being added as an authorized user will not make a huge difference in your score. But as long as you are both amenable and the account holder always pays bills on time, it won’t hurt your score to be added. Just know that there are other things you can do that will help you more.
What else can you do to boost your credit?
Becoming an authorized user isn’t the only way to boost your score. While it can be worthwhile, actions that you take yourself may be more beneficial. First and foremost, be sure that you are paying all of your bills on time and as agreed. Enrolling in a free program like Experian Boost will let you take advantage of your good payment history with your utility and cellphone payments.
Keep in mind that this program will only benefit your Experian score. If you are a renter, you might benefit from enrolling in a program that will report your rent payments to the credit bureaus (this is not standard practice for most landlords, so you will have to ask if yours does this already).
Retail and gas credit cards generally have lower credit requirements, so you might consider signing up for one of those. You can also look into starter cards for credit newbies such as secured cards or student cards if you’re in school. Adding this kind of positive history to your credit report is the best way to start building a credit score you can be proud of.
Adding yourself to a credit card as an authorized user can help you improve your credit score. To get the best results, the primary cardholder should have good financial habits. This can be a good option if you need to raise your credit score, but make sure you and the primary cardholder have an agreement regarding how and when you’ll reimburse them for your charges.