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How Being an Authorized User Affects Your Credit

If you or someone you know is on a credit repair journey, becoming an authorized user is probably a topic that has been top of mind.

Becoming an authorized user is a common way to improve your credit file because it gives you access to a credit line without having to qualify for it yourself. This allows you to piggyback off of the primary account holder’s good credit as a way to boost your overall credit score.

However, there are certain risks to consider about authorizing users on a credit card. Both the authorized user and the primary cardholder are putting their credit score in the hands of the other. If either person makes late payments or overspends on the credit card, both credit histories could be impacted as a result.

Authorized usership is a great credit-building tool that should be carefully considered before going through with it. If you are considering authorizing a friend or family member as an authorized user, read our full breakdown of the risks, benefits, and considerations of becoming an authorized user.

What Is An Authorized User?

An authorized user is a person who is recognized by the credit card company as someone who can make purchases on another person’s credit card account. They are given a secured credit card and are able to spend on that card at their own discretion.

The main benefit is that these users are able to use the account as a means to build up their own credit history.

Making on-time payments is a huge component of one’s credit score. If someone has a history of making late payments on accounts or overspending, accessing someone else’s account as an authorized user can help them repair their credit history over time.

On the other hand, an authorized user opens up the primary account holder to the risk of having someone misuse their credit card.

Authorized users are not legally liable for repaying the account balance – even if they make purchases on it. This means if they bring their bad habits to the primary’s account, the account holder could be putting their own credit and financial well-being in jeopardy.

Who Is Allowed To Be An Authorized User?

Legally speaking, there are no age restrictions to adding an authorized user to your account. But the credit card issuer may have rules regarding who is allowed to be added as an authorized user on the account.

Typically, people will add someone who is close to them as an authorized user on their account. This can include:

  • partners
  • children
  • parents
  • grandparents
  • siblings
  • friends

A common example is adding a child or teenager to help build their credit history and teach them credit card responsibility.

Besides choosing your authorized user carefully, you should discuss reimbursement and spending power.

Be sure to openly discuss what the credit card may be used for and how you expect the user to pay you back. Many credit cards allow you to set spending limits on authorized users, which can help control teens or over-spenders from getting too crazy.

Taking on an authorized user on your account is a big deal. It requires mutual trust and a clear understanding of the purpose of such an arrangement. If they make any mistakes, it will be on you to clean up after them. That is why you should clarify the expectations of their being added to your account.

Does Being An Authorized User Affect Your Credit?

Being an authorized user can affect your credit score positively, negatively, or not at all. It all depends on two factors: the credit habits of the account’s users and whether the card issuer reports the account to credit bureaus.

An authorized user’s credit can only be affected by the shared account if the credit card company reports the account back to the major three credit bureaus (TransUnion, Equifax, and Experian.)

If the lender does report the account to the credit bureaus, then you will see the impact show up in your credit report.

Whether the account has a good or bad impact on your credit depends on the account activity. If you and the primary account owner pay bills on time and maintain a low credit utilization rate, you will both see this reflected positively on your credit reports.

However, if either person mismanages the account, both credit scores will suffer.

Can You Build Credit As An Authorized User?

One of the main reasons people are added as authorized users is to build good credit. However, this all depends on the credit habits that the primary account holder and the authorized user bring to the account.

Credit scoring models take a number of different things into account when rating a person’s overall credit. Making on-time payments, having a low credit utilization ratio, and having a high average age of accounts are all factors that show creditworthiness.

But what does this mean in terms of a credit card? In order to improve your credit, you should:

  • Pay the credit card balance on time each month.
  • Spend well below the credit limit.
  • Be mindful of available credit.
  • Maintain the account for several years.

If you are doing these things as an authorized user, congratulations! You’re well on your way to boosting your credit score. However, if the primary on the account is neglecting responsible credit habits, you may want to remove yourself from the account.

If you decide that you would like to be removed from the account, you simply need to contact the credit card company and request to be removed.

The credit card issuer will be able to tell you if the account will be removed from your credit report as a result. If the account doesn’t automatically disappear from your credit report, you can contact the major credit bureaus to request that the authorized user account be removed.

How To Add An Authorized User To Your Account

Now that you understand the risks and rewards associated with being an authorized user, it’s time to get you set up on an account.

Adding an authorized user to a credit card account is much simpler than creating a joint account.

  • Call the Credit Card Company or Go Online: The primary account holder just needs to call the credit card company – whether that’s American Express, Discover, Chase, or Visa – and request that an authorized user be added to the account. Some credit card companies may even allow you to do this through your online account.
  • Provide Authorized User Information: Every credit card company will have different requirements regarding what information is required. This may include name, birthdate, address, or social security number. Because of this, it is sometimes easier to contact the credit card company with them so they can provide this information.
  • Set Spending Limits: Spending limits are often a big consideration for people adding an authorized user to their credit card account. If you would like to set up spending limits, you can inquire about this when you set up the account.
  • Credit Card Issued: Once the account is in place, the credit card issuer will send out an authorized credit card to the new user, as long as they meet the minimum age requirement. Once the authorized user receives their credit card, they will need to activate the card before they can use it. From there, they are free to spend on the card at their own discretion.

It’s just as easy to remove an authorized user as it is to add one. In order to remove them, the primary cardholder can contact the credit card company and request the change. They can also request that they receive a new card to ensure the account information is updated.

Pros of Authorized User Status

With responsible use and timely payments, authorized user status help you build or rebuild credit and can improve your credit score over time. Designating an authorized user can be a boon for primary cardholders by increasing reward earnings and lowering credit utilization.

  • Builds the Authorized User’s Credit. The most compelling case for authorized user status is its credit-building power for people without a history of credit, such as students and young adults. Provided the issuer reports the authorized user account to the consumer credit reporting bureaus, it helps build up the user’s credit — an essential prerequisite for future loan applications.
  • Could Improve the Authorized User’s Credit Score. Over time, a pattern of timely repayments and responsible use (in other words, low credit utilization) can work to raise the authorized user’s existing credit score. Although the improvement is unlikely to be quick or dramatic, anything helps when you’re repairing damaged credit.
  • Keeps Seldom-Used Accounts Active. By adding an authorized user to a seldom-used credit card account, the primary cardholder ensures the account remains active. Each older, still-active credit card account helps keep the primary’s overall credit utilization rate low and raises their average account age. Both factors work to raise credit scores over time in the absence of negative factors like delinquencies.
  • Increases Reward Earnings. Two spenders are better than one — when it comes to racking up credit card rewards, at least.

Cons of Authorized User Status

Authorized user status is a potential credit risk for authorized users and primary cardholders alike. A breakdown in communication between users could have consequences for their personal relationship as well.

  • Potential Risks to the Authorized User’s Credit. Although the primary cardholder is ultimately responsible for making timely card payments and keeping credit utilization in check, any lapses could negatively impact the authorized user’s credit if the account displays as delinquent on the authorized user’s credit report.
  • Could Negatively Affect the Personal Relationship Between the Primary and Authorized User. Should the authorized user rack up more charges than the cardholders can repay on time, acrimony is all but assured. If you’re not certain you can live up to your obligations as an authorized user, think carefully before jeopardizing a close relationship.
  • Higher Risk of Lost or Stolen Cards. A credit card is more likely to go missing or fall into the wrong hands when it has a copy. If your authorized user card has the same number and security code as the primary card, the primary cardholder will need to cancel and reissue the card in the event of a loss.

Your Rights & Responsibilities as an Authorized User

As an authorized user, your rights and responsibilities differ from the primary account holder’s. Your role is subordinate and you lack full control over the account, so it’s a stretch to call an authorized user account “yours.” But you’re still expected to keep up your end of the bargain.

What You Can Do as an Authorized User

As an authorized user, you’re obligated to keep your card secure and use it responsibly. Here is what you can — and should — do:

  • Earn Rewards on Card Spending. Authorized user spending earns rewards at the same rate as the primary cardholder’s spending. It doesn’t hurt to ask your primary if they’re willing to share the spoils with you — if you don’t already live together, that is.
  • Enjoy Certain Card Benefits. Authorized user cards generally carry the same benefits and privileges as primary cards. For instance, the Chase Sapphire Reserve Card’s airport lounge access benefit — one of the card’s top selling points — applies to the primary card and all authorized user cards. The exceptions to this rule are benefits awarded on a per-account basis only, as is the case with travel credits such as The Platinum Card from American Express’ $200 annual airline fee credit.
  • Keep Your Physical Card and Card Number Secure. Using the card is a responsibility, not a right. Treat your authorized user card and its number with the same care as you would a credit card in your own name. If you misplace an authorized user card with the same number as the primary card, the primary will need to lock the entire account and reissue the card — a major inconvenience, especially if you or they are on the road.
  • Avoid Overspending. Although you’re not personally responsible for the charges you make as an authorized user, overspending could strain the primary’s ability to make timely repayments. That, in turn, could negatively affect your credit down the line.

What You Can’t Do as an Authorized User

As an authorized user, you’re forbidden from making changes to the primary cardholder’s account information or payment methods. Although you have the ability to make charges on the account (unless the primary revokes this), you’re not technically responsible for them — the primary is.

Here is what you can’t do as an authorized user:

  • Change the Primary Cardholder’s Information. As an authorized user, you’re unlikely to be granted your own account management login, which means you can’t change any account-related information without the primary cardholder’s credentials. If the primary account holder trusts you, they could always give you the password — although for obvious reasons that’s not recommended.
  • Close the Account. You’re not authorized to close the entire card account.
  • Redeem Rewards. You can earn rewards on the account, but you can’t redeem them. That’s the primary’s benefit, although they should be happy to spread the wealth.
  • Directly Pay Card Balances. Without your own login for the card account, you can’t directly pay card balances. However, nothing stops you from compensating the primary cardholder for your charges.
  • Take Responsibility for Card Balances. As an authorized user, you’re explicitly not responsible for card balances. If the primary cardholder always pays the bill on time, this is a good thing — you get the benefits of responsible credit use without being personally liable.
  • Disclaim the Primary Cardholder’s Account Activity. On the other hand, you can’t disclaim the primary cardholder’s account activity. Your fates are joined. If they go on a spending spree that they can’t afford, your credit could suffer.

What You Might Want to Do as an Authorized User

Although authorized user status obligates you to none of the following moves, some or all could benefit you.

  • Ask the Issuer to Report Your Authorized User Account to Credit Bureaus. Most credit card issuers report authorized user accounts to consumer credit bureaus, but it doesn’t hurt to confirm with your issuer. Without such reporting, your authorized user account is useless for credit-building purposes.
  • Help the Primary Make Timely Payments. Although the primary cardholder is solely responsible for all card balances, nothing stops you from helping them out if they can’t make a payment on time. Faced with a choice between credit-damaging delinquency or a temporary hit to your bottom line, you should choose the latter.
  • Set Usage and Spending Limits. Consider working out informal usage and spending limits with your primary cardholder with the aim of keeping the account’s credit utilization below 40% or so. Higher credit utilization could be detrimental to your credit score (and the primary’s).
  • Apply for an Entry-Level Credit Card. Leverage your authorized user account’s credit boost to apply for a credit card of your own — probably an entry-level card like the Petal Cash Back Visa Card or a low-limit secured credit card. You don’t want to be an authorized user forever, after all.

Should You Become An Authorized User?

Authorized user status is a significant step for any relationship, so it’s important to discuss the possible pitfalls and risks associated with this type of financial step.

When done correctly, it is a great way for you to improve your credit and learn important financial habits.

Grant Sabatier is a co-founder and CEO of MMG Media Group, which owns Grant is also the Creator of Millennial Money and Author of the International Bestseller Financial Freedom (Penguin Random House), which has been translated into fifteen languages. Dubbed the “Millennial Millionaire” by CNBC, Grant went from $2.26 to a millionaire in 5 years, reaching financial independence at the age of 30. Grant has been featured in The New York Times, The Washington Post, NPR, BBC, CNBC, Forbes, Business Insider, Money Magazine, The Wall Street Journal, Marketwatch, the Rachael Ray Show, and many others. He cares passionately about sharing his story to inspire others to build a life they love, reminding everyone that time is more valuable than money, and building cool stuff.
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