If building a good credit score is your top priority, you have many tools at your disposal to help you reach your financial goal, like paying your credit card bills on time and keeping your credit card utilization low.
But if you’re just starting out or rebuilding a low credit score, you might not qualify for a credit card in the first place. In that case, becoming an authorized user on someone else’s credit card might be a good option for you.
If you’re considering becoming an authorized user or adding someone to your account, there are a few factors to consider as you proceed.
What is an authorized user?
Anyone with a credit card account can add an authorized user to their account. Authorized users are often family members, legal guardians, or other trusted individuals with whom the cardholder wants to share use of their account.
After the primary account holder signs off on the authorization, the authorized user gets a card in their name linked to the original cardholder’s account and can use it to make purchases.
Unlike joint accounts — where both cardholders share power and responsibility for the account — authorized users aren’t legally liable for the account balance and can’t make changes to the account like increasing the credit limit or adding other authorized users.
Being an authorized user is also different from having a co-signer vouch for you when applying for your own credit card. A co-signer helps you qualify for a personal card that only you have access to, as opposed to being an authorized user on someone else’s card.
How being an authorized user can affect your credit score
Potential lenders refer to your credit score when considering you for a loan, credit card, or line of credit. The score is a three-digit number on a scale of 300 to 850, with high scores indicating low risk and low scores indicating high risk. The higher your credit score, the higher your chances of getting a good credit card or low-interest loan.
While being an authorized user on someone’s account has the potential to impact your credit score (for better or worse), it might also not have any impact at all.
Let’s consider all three possible scenarios:
No impact on your credit score
Not all credit card issuers report activity by authorized users to the three major credit bureaus who put together your credit reports. If your account activity doesn’t appear on your credit report, your credit score won’t be affected in any way.
Before applying, you can usually ask the credit card company if they send reports for authorized user accounts. Otherwise, you can review your annual credit reports from the three major credit bureaus — Equifax, TransUnion, and Experian — after becoming an authorized user to see whether the account shows up.
Positive impact on your credit score
For authorized user activity to improve your credit score, a few things need to happen.
First, as mentioned above, the card issuer has to report the activity to the credit bureaus.
Next, the primary cardholder and the authorized user must maintain the account in good standing. Payment history counts for 35 percent and credit utilization for 30 percent of your credit score, so it’s important to pay bills in full and on time and keep the card balance low.
If both users keep up good habits on the account, in time, you’ll see a positive impact on your credit score.
Negative impact on your credit score
Just as good financial habits will help you build your credit score, bad habits can bring it crashing back down.
Again, payment history and credit utilization are the main culprits. Late and missed payments negatively impact credit score, as do high account balances. If the primary cardholder and authorized user don’t set out a careful spending plan and maintain good communication, things can quickly get out of hand.
How to build your credit score as an authorized user
If you want to improve your credit score by becoming an authorized user on another person's credit card, follow these three easy steps:
One — ask for help
The first step is to ask a friend or relative with excellent credit to add you as an authorized user on their account. To get the maximum positive effect on your credit score, look for an account with an excellent payment history and low credit utilization.
You may need to check with the credit card company or credit bureaus to confirm that the card’s entire payment history, including authorized user activity, will be reported. You'll also have to provide basic personal information like your name, address, date of birth, and social security number.
Two — make a plan
Discuss with the primary cardholder how you plan to use the account together. Good communication is key.
Remember they’ll generally be responsible for paying the bill, and any missed or late payments will appear on both your credit reports. You should agree on a spending limit to ensure that credit utilization remains low and they’re able to make full payments on time.
Three — be patient
Even once you’re set up as an authorized user on an account in good standing, it will take time before you see a positive impact on your credit score. If you both keep up good credit habits and practice clear communication, you should eventually build a high enough credit score to qualify for your own credit card.
Pros and cons of being an authorized user
Here is a breakdown of the pros and cons of being an authorized user:
- No credit check — you can access a credit card even if you have bad credit or no credit history.
- You can potentially build good credit for yourself.
- You can help keep a rarely used account active.
- The primary cardholder earns extra rewards on purchases made by authorized users.
- You don’t build credit as quickly as other methods.
- You can potentially damage your credit score and that of the primary cardholder if you misuse the account.
- Some credit card companies may charge an annual fee to add an authorized user.
How to build your credit score on your own
If you’re trying to build credit to use a credit card, there are other options available to you besides becoming an authorized user.
Credit building tools like secured credit cards, low-limit credit cards, and credit-builder loans are designed to help people with little or no credit access credit products and start building a credit history.
Who can be an authorized user?
Regulations on authorized users vary from one company to another. Some have minimum age requirements or other limits on who can be added to an account. Check with your credit card issuer before applying.
Do authorized users have spending limits?
Some companies allow primary cardholders to set spending limits for authorized users on their credit accounts. If not, the credit limit for the account applies to the total spending of both users.
Can an authorized user hurt the account owner’s credit?
Yes. Although the primary cardholder remains solely responsible for paying the bill, if an authorized user overspends, it can lead to missed payments, unpaid balances, and a poor credit utilization ratio, all of which hurt the account owner’s credit score.
Is an authorized user responsible for the account owner’s debt?
Because the account owner is accountable for paying the bill, they’re responsible for any debt attached to the account — old or new. An authorized user isn’t affected by the account owner’s debts, unless their shared account’s balance goes unpaid (since this harms your credit history).
The account owner doesn’t take responsibility for the authorized user's previous credit card debts, but they remain solely responsible for any potential unpaid balance on the shared account.
The bottom line
If you want a simple way to build credit from scratch, becoming an authorized user is one strategy you might pursue. But you have to be methodical and plan ahead to make the most out of this method.
And remember, the first step towards better credit is to develop healthy money habits and stay within your budget. When you get a credit card, be sure to pay your bills on time, keep your credit utilization rate low, and avoid applying for credit you don’t need.
If you want an excellent alternative to credit cards, try PointCard™.
A transparent, easy-to-use alternative payment card, PointCard allows you to spend your own money while also receiving exclusive benefits, including unlimited cash-back on all purchases and bonus cash-back on subscriptions, food delivery, rideshare services, and coffee shop purchases.
You also get fraud protection with zero liability, no interest rates, and rental car and phone insurance.
Made to spend.