These days, improving your credit score can take many different forms. Becoming an authorized user on the credit card of someone else — typically a more-established credit user — can help enhance your score as you work on building up your credit history. Because the other person’s credit habits will reflect directly on you, you might be able to increase your score more quickly and effectively than you would with your own efforts. As an authorized user, you’ll enjoy many of the same privileges accorded to a typical cardholder, such as receiving a card with your name on it and using it to make purchases. For that reason, taking on an authorized user status is an excellent tool for those with limited to no credit history. However, there are some important distinctions that you’ll want to consider before you make your decision. Here’s what you need to know about authorized user status and how you can use it to your advantage.
How It Works
As an authorized user, you hold no responsibility for paying the balance on the credit card bill. That fact alone can make the prospect of becoming an authorized card user very tempting — but it is still a decision that will have significant financial repercussions. Since someone else is forking over the money for your purchases in addition to their own, it’s even more important to follow good budgeting and spending practices. Remember that if the primary cardholder cannot afford to pay off a large balance, your own credit score will take a hit.
Choosing a Financial Partner
The person who adds you as an authorized user could have the power to boost your credit score dramatically — so make sure you’re choosing someone who already practices excellent credit habits. You’ll want to know if the account you’re being added to has been open for a while, typically carries a low balance, and boasts consistent on-time payments. It’s also a good idea to discuss your financial goals in the beginning. For instance, if you plan to be an authorized user for a short period of time (perhaps six months to a year) in order to later qualify for higher-limit credit cards, let the other person know this is a temporary arrangement with a set end date. Establishing clear guidelines and expectations at the start is the smartest way to head off a future conflict.
Effects on Your Credit Report
Before you sign on as an authorized user on someone else’s account, verify that the account is one that is reported to the major credit bureaus. The major card issuers will usually report the entire history of the account on your credit report. You can expect to see a difference in your score as soon as that information shows up on your report, usually within 30 days from your addition to the account. Keep in mind, though, that not all accounts are reported to the credit bureaus. If the account in which you’re an authorized user belongs to a smaller bank or credit union, the credit history may not be reported — and therefore it won’t impact your credit score. Generally, credit score formulas will weigh the primary cardholder’s history as if it were your own personal history, so you would benefit from the longer record of the other person’s timely payments.
One major advantage of the arrangement is that authorized users can be removed from the account at any time. You can simply contact the card issuer and request to be taken off the account. This option can be useful if your relationship with the cardholder changes or their financial habits start to suffer. Or you might decide the arrangement has simply run its course and you’re ready to apply for a card in your name only. Depending on the credit scoring model, the entire account and its history might disappear from your credit report entirely — or it could remain for several years and continue to impact your credit score. Either way, you’ve likely gained valuable practice using credit and set a solid foundation from which to continue to build your credit score.
Requesting that someone else add you as an authorized user is one way you can safely and effectively bolster your credit profile with the help of someone else. Give your score an even bigger lift by reaching out to the pros at Ovation Credit, where we help credit users tackle disputes and fix credit issues every day. Set up your free consultation here.