Does Being An Authorized User Help Build Your Credit?
There aren’t many ways to build your credit score that don’t involve you actually applying for and getting credit yourself.
But becoming an authorized user on someone else’s credit card is actually one of them.
In this detailed guide, we go over what it means to be an authorized user, how doing so impacts your credit score, how to add an authorized user to a credit card, and much more.
What does it mean to be an authorized user?
Did you know that credit card holders can add other users to their accounts?
What this means is that the person added is authorized to use this credit card to make purchases just like the primary card holder, an option that's available upon applying for a credit card, but it can also be done later.
It’s important to note, however, that as an authorized user, you don’t have the authorization to make other changes to the account, like adding more users to the account or requesting credit increases. You also won’t be held responsible for the debt should the primary card holder default on their payments.
Becoming an authorized user is a good idea in many situations.
This is an effective strategy that many parents use to help their children start off on the right foot with their credit.
How being an authorized user impacts your credit
Most credit card companies will report payment activity on authorized users’ credit reports as well as those of the primary card holders. And if the primary card holder makes their payments on time, this will give your credit score a boost.
But on the flip side of this, be aware that if they don’t pay their bill on time, it could also tank your score pretty quickly.
It’s also helpful for your score if the primary card holder keeps their credit utilization ratio low, which just means that they don’t use all of their available credit on the card.
Most credit experts recommend keeping this number below 30%, but as an authorized user, it can probably be a little higher and still help you out.
Risks of being an authorized user
Like I said, having someone else's credit history on your credit report is a good thing, so long as the account remains in good standing. But the other risk of being an authorized user is when the primary account holder racks up a lot of debt.
Since this affects their credit utilization ratio, it could also affect yours, causing your credit score to drop a few points or even up to 100 points, depending on how much credit you have yourself.
It's worth nothing however that negative items of this nature are typically very easy to get removed from your credit report.
As an authorized user, you're not legally responsible for any debt incurred. And some (not all) credit card companies don’t collect signatures or personal information, so you're pretty much in the clear.
You can dispute these items and most companies will promptly remove them from your report.
Who can you ask to add you as an authorized user?
While this tactic can help you significantly boost your credit score, the tricky part may be finding someone willing to do it.
The first thing you need to know about the person you ask is whether or not they have good credit habits. Since you're basically putting your credit score in their hands, it’s important to find a responsible party.
With this in mind, you can ask your parents, friends, or other relatives.
Most of them will probably want a clear agreement that you won’t actually use their card. Remember, you are just using their accounts to build good credit.
But on that note, they don’t actually ever have to hand a card over to you, or any of their account information. You can possibly give them that assurance and get them to agree to adding you.
How to add an authorized user to a credit card
It’s usually pretty easy to add an authorized user to a credit card account. You can call the customer service number for your company or find a link online.
To use Discover for an example, they have a pretty straightforward online portal for their customers. You can log in to your account, click on “Manage,” and then click on “Manage Authorized Users.”
Or from the Help Center, you can click on “Account Management.”
Either method should take you to this screen:
Once you click on the “Add a User” button, you’ll be prompted to enter the authorized user’s full name, address, date of birth, and social security number.
Authorized users and credit card rewards
If the primary account holder has some type of rewards card, you might be wondering how this affects you.
For one thing, if you’re actually using the card, you can help the primary card holder accumulate points, which can be a big benefit for them, and a good way to convince your parents to add you to their account. But you also may be able to redeem some rewards yourself if the primary isn’t opposed to it.
Some credit cards allow authorized users to redeem rewards, but some don’t.
Citi Bank, for example, allows authorized users to request reward checks they’ve earned. But those checks will be made out to the primary card holder. And some of their cards even allow the primary card holder to gift their points to an authorized user.
Wells Fargo also allows authorized users to use rewards as long as the primary card holder makes that specific designation.
Capital One and Chase are some of the other companies that offers authorized users access to the primary card holders rewards.
But Bank of America, Discover, and American Express do not.
Authorized users vs. joint account holders
Authorized users are not to be confused with joint account holders. There’s actually quite a bit of difference.
Mainly, an authorized user cannot be held legally responsible for the debt incurred on the account, but a joint account holder always is.
A joint account holder is equally liable for all charges and debts. (It’s how a lot of married couples apply for credit).
And it’s a good way to ensure that another person isn’t going to go crazy with your credit card because it affects them just as much.
Some credit card companies don’t allow people to open joint accounts. But the ones that do often require you to open them jointly from the beginning.
In other words, you can’t usually add a joint account holder to an existing account.
More tips for building your credit
Becoming an authorized user on someone else’s credit card is a good way to get started building or repairing your score.
But it’s certainly not the only way. Here are some helpful tips:
They will charge you a fee, but the cost can certainly be worth it in exchange for all the benefits you get from having a higher credit score.
Becoming an authorized user on someone else’s credit card can be a great way to build or repair your credit.
Just keep in mind that if they allow you to use their card, they’re putting a great deal of trust in you.
But equally as important is the trust you are putting in them to have a positive impact on your credit score.
So, if you do choose to go this route, be sure you find someone financially responsible enough to live up to the task.
About the Author
Mike is a recognized credit expert and founder of Credit Takeoff. His credit advice has been featured in CNBC, Investopedia, CreditCards.com, Bankrate, Huffpost, The Simple Dollar, Reader's Digest, LendingTree, and Quickbooks. Read more.