As an authorized user, that status can greatly affect your credit score and overall financial health. Whether you want to improve your credit or are thinking of having someone be an authorized user on your account, knowing the details of this status is key.
Today, we’re exploring what it means to be an authorized user status, how it can affect your credit history, and the benefits and risks. By the time you finish this article, you’ll have a better understanding of what it means to be an authorized user and how that impacts your financial future.
What Is a Credit Card Authorized User?
An Authorized user is an individual who is added to another person’s credit card account. They receive a card in their name but are not responsible for paying the bill. Ultimately, the primary account holder is responsible for the payments.
An authorized user may make purchases with the credit card, but the primary cardholder pays the bills. You are not legally responsible for the debt when you are an authorized user. But the credit card activity can impact both the primary cardholder’s and the authorized user’s credit scores.
If the primary account holder has good credit and doesn’t rack up debt through the credit card, this can help someone build credit as an authorized user. Some credit card issuers notify the credit bureaus of the account’s activity, meaning it could reflect on the authorized user’s credit report.
The primary cardholder has to request this from their credit card company in order for someone to become an authorized user. Some credit card issuers don’t charge fees, and others do It’s a great option for those who want to use a credit card, but don’t want the full responsibility of the account.
How Does Being an Authorized User Work?
If you are an authorized user, it means you have been added to someone else’s credit card account. You are issued a card with your name on it but do not own the account. The main cardholder is still responsible for paying the bill.
Using the Credit Card
You can use the card to make purchases as an authorized user. You don’t have to pay the bill; the primary cardholder does that. The credit card company does not need you to pay.
Impact on Credit
The amount and payment activity on the account can be reflected in your credit report. It can help your credit score if the primary cardholder keeps the account in good standing.Missed payments might also negatively impact your score.
No Legal Responsibility
You owe nothing on the debt. The balance must be paid by the primary cardholder.
Becoming an Authorized User
The primary cardholder will need to call the credit card issuer and request to add you as an authorized user. Some issuers charge a fee while others do not.
Being an authorized user can do wonders for your credit scores, provided that the primary account holder follows good credit habits.
Benefits Of Adding Authorized Users
Authorization to use a credit card account can provide upside for both the account owner (primary account holder) as well as the authorized user of that credit card account (the authorized user). Here are some key advantages:
1. Build Credit for the Authorized User
A major benefit is that it might enhance the credit score of the authorized user. The account’s balance, payment history and credit limit are typically reported to the credit bureaus. The behavior of the primary cardholder impacts the authorized user’s credit positively if the primary has a good credit card history.
2. Access to Credit Without Full Responsibility
Being an authorized user allows them to use the card and reap the benefits of card use. But they are not responsible for paying. The bill is paid by the primary cardholder.
3. No Impact on Credit Utilization Ratio for Authorized User
The credit limit on the account is generally reported as a part of the authorized user’s credit utilization ratio. This can help improve the authorized user’s credit utilization (i.e., the amount of credit being used), which in turn raises the user’s credit score, as long as the primary cardholder has a high limit and low balance.
4. Convenience for Family Members
Adding a family member (or someone you trust) as an authorized user makes it easy for them to have access to a credit card for emergencies or everyday purchases. This is beneficial for teens or college kids trying to establish credit for the first time.
5. Earn Rewards and Benefits
Authorized users can often earn rewards like cash back or points from the card’s purchases. They also enjoy other benefits, like travel insurance or purchase protection, if the card offers them.
Adding an authorized user is a great way to help someone build credit while keeping the primary cardholder in control. It’s a simple way to provide access to credit and earn rewards.
Drawbacks Of Authorized User
Being an authorized user has its perks, but it also has some downsides to keep in mind. Here are a few key disadvantages:
1. No Control Over Payments
As an authorized user, you don’t have control over the payments. The cardholder whose name (or, in this case, the main cardholder) who is ultimately responsible for paying the bill. If the main cardholder sometimes misses payments or carries high balances, it can have an adverse impact on your credit score.
2. Possible Negative Impact on Credit
If the primary cardholder has a bad credit history or pays the card late, this may be reflected on your credit report. It can reduce your credit score, even though you are not responsible for the debt. This is particularly dangerous if the primary user does not handle the account responsibly.
3. Can Be Removed Without Notice
The primary cardholder can revoke your status as an authorized user at any time without your knowledge or permission. That could leave you unable to access the credit card at any time they choose to make changes.
4. Limited Credit Building Opportunities
Although being an authorized user can help build credit, it isn’t as impactful as having your own credit account. You’re not going to get experience managing your own account, which is a key aspect of developing good credit habits.
5. Not All Credit Card Companies Report to Bureaus
Not all credit card companies report authorized user activity to credit bureaus. In fact, in some instances, being an authorized user does little or nothing to help your credit score.
Though being an authorized user has advantages, such as building credit history and getting to use a credit card, there are risks, too. Drawbacks include the potential harm to your credit if the primary cardholder runs up a balance and doesn’t pay it off, as well as the lack of control you have over payments.
Who Can Be An Authorized User?
An authorized user is someone the main cardholder gives permission to use their credit card. They receive a card with their name on it but are not responsible for the bill.
Family Members
It is most common to designate family members as authorized users. This includes:
- Spouses: for shared access to credit or to build credit together.
- Children: Parents may add their kids, particularly teenagers, so they can start building credit early.
- Parents: In some cases kids will add their parents as authorized users for convenience purposes or to build their credit.
Friends or Trusted Individuals
An authorized user doesn’t necessarily have to be family. They can add friends or other trusted individuals to assist them build credit or to use the card to meet specific needs.
Minors
Minors (those under 18) may also be added as authorized users, typically by their parents. “While they are not responsible/accountable for the payment aspect, this allows them to start building credit at an early age.”
Anyone You Trust
The primary cardholder can request for any trusted individual to be added as an authorized user. However, the cardholder must feel certain that the person will use the card responsibly, because they are responsible for paying the bill.
The authorized user can be anyone, such as a family member, friend, or trusted person. The primary cardholder determines who can be added and is responsible for the payments.
What Responsibilities Does An Authorized User Have?
An authorized user has less responsibilities than the primary cardholder. Here’s what they are and aren’t responsible for:
Using the Card
A credit card can be used by an authorized user to make a purchase. They can purchase items and use the credit line as permitted by the primary card owner.
No Payment Responsibility
An authorized user does not have to make payments on the credit card. The authorized user may use the card, but the primary cardholder is the one who has to pay the bill.
Building Credit
One major role an authorized user plays is using the card in a responsible manner, which can build credit. But they need to keep an eye on whether they overspend or miss a payment, as both can negatively affect their credit score.
Following Card Rules
An authorized user can make purchases, but they still must adhere to rules proposed by the primary cardholder. That includes only making approved purchases on the card and adhering to any limits established by the primary cardholder.
No Legal Liability
An authorized user is not legally responsible for the debt. If the primary cardholder fails to pay, the primary cardholder assumes responsibility, not an authorized user.
Does Being An Authorized User Affect Your Credit?
Yes, being an authorized user can impact your credit for better or worse.
Positive Impact on Credit
If the primary cardholder pays on time and has a good credit history, activity on the account is generally reported to the credit bureaus. This may help boost your credit score. The account’s credit limit and payment history could appear on your credit report, potentially increasing your credit utilization ratio and demonstrating positive payment behavior.
Negative Impact on Credit
On the other hand, if the primary cardholder has a bad credit history, high outstanding balances or misses payments, it can reflect badly on your score. Although you’re not responsible for the payments, the negative activity may still appear on your credit report.
Credit Score Influence
Your credit score will take a hit based on what the primary cardholder does with the account. Using credit responsibly can help you establish a solid credit score, while mismanaging credit will hurt your score.
Not Always Reported
Not all credit card issuers report activity for authorized users to the credit bureaus. In that case, you would have no impact on your credit score by being an authorized user.
If the primary cardholder maintains the account well, then being an authorized user can help you build your credit. But if they miss payments or use the card irresponsibly, your credit will take a hit. Standard practice for the credit card issuer to report the account activity.
How To Add Or Become An Authorized User?
Here are the steps on how to add or to become an authorized user on a credit card:
1. Contact the Primary Cardholder
The primary cardholder must initiate the process to add an authorized user. A primary cardholder is an individual who owns and manages the credit card account. They can call their credit card issuer, visit the card issuer’s website or use the mobile app.
2. Provide Personal Information
The primary cardholder will need to provide the following details of the authorized user:
- Full name
- Date of birth
- Social Security Number (SSN) or ITIN (sometimes required)
Some issuers may not require all this information for minors, but the authorized user must be at least 13 years old (the age requirement may vary by issuer).
3. Request Addition
The primary cardholder will request to add the authorized user either through customer service, the issuer’s website, or by filling out a form. The card issuer may ask for additional documents, such as proof of address, depending on their policies.
4. Approval & Card Issuance
The main cardholder will apply to add the authorized user via customer service, the issuer’s website or by submitting a form. Depending on a card issuer’s policies, they might also request additional documents like proof of address.
5. Authorized User’s Responsibilities
The authorized user can use the account to make purchases, but they are not responsible for the bill. The main cardholder is responsible for the total amount owed. With certain credit cards, the primary cardholder has the ability to set spending limits for the authorized user.
6. Building Credit
An account with no credit history can build credit as an authorized user. The credit card issuer often reports the account’s activity to the credit bureaus, so positive payment history and credit utilization can improve the authorized user’s credit score.
7. Monitor Account
both the primary cardholder and authorized user should actively monitor the account to ensure all spending and payment practices meet agreed upon standards. In case issues arise, the main cardholder can revoke the authorized user whenever they want.
Becoming an authorized user can be a helpful way to build credit, but it needs both connection and communication between those involved.
How To Remove An Authorized User?
Here’s how to remove an authorized user from a credit card account:
Contact the Card Issuer
The main cardholder will need to contact the credit card issuer. Through customer service, the online account portal or the issuer’s mobile app.
Provide Account Details
The primary cardholder must have the following details on hand:
- Credit card account number
- Authorized user name to remove
The issuer may require more documentation from the primary cardholder to verify his or her identity.
Request the Removal
After making contact with customer service, or logging into the account, the primary cardholder can make a formal request to remove the authorized user. The issuer will take the step, and it’s often a straightforward request to take the user off the account.
Confirmation from the Issuer
Once the request is processed, the card issuer will confirm that the authorized user has been removed. You will receive confirmation of this, either by email, notification in the online portal or from customer service.
Return or Destroy the Card
When removed, the authorized user has no longer access to the account. The issuer can demand the return of the credit card that was issued in the name of the authorized user, or they can simply burn the card and prevent the usage of the card by the authorized user.
Impact on Credit
Removing an authorized user can impact their credit score. The account’s payment history, credit utilization and other factors might no longer show up on the authorized user’s credit report. If the account had a long track record of positive credit history, then this could bring the score down.
Monitor the Account
The primary account holder should still keep an eye out for any unauthorized charges on the account, particularly after removing an authorized user.
It’s a straightforward process, but one that needs to be done well because the account may have been helping the user’s credit. Be sure to consult your individual card issuer for specific guidelines.
Final Words
If you’re the one who needs to establish credit or repair your credit history, becoming an authorized user can be beneficial. This is the process of piggybacking on someone else’s good credit behavior by being added to their credit account, which may help improve the user’s credit account score. Just keep in mind that you won’t be on the hook for the debt; you’ll simply benefit from positive account activity, as an authorized user. And if you want to learn more about the pros and cons of becoming an authorized user to help you take control of your credit health, contact me.
FAQs
Will Authorized User Status Help You Build Credit?
Yes, it can help you build credit if you’re an authorized user. If the primary account holder has a good payment history and properly managed credit utilization, the authorized user receives the benefit of those factors being reported to credit bureaus when a credit card account is opened in their name. This can help raise their credit score as well, especially if the primary cardholder has a good history.
How Does Authorized User Status Help My Credit Score?
Being an authorized user also benefits your credit score since it adds the primary cardholder’s positive payment history and credit utilization to your credit report. If you have limited or no credit history, the on-time payments and low credit usage from the primary account can raise your score.
How Much Will My Credit Score Increase As An Authorized User?
As an authorized user, your credit score is affected differently. If the primary cardholder has a history of on-time payments, a low credit utilization ratio and a long account history, your score might rise considerably — in most cases, 10 to 50 points or more. Outcomes depend on your credit profile and the account’s management.
What Is The Difference Between Authorized User And Own Credit Card?
An authorized user is added to another person’s credit card account and can benefit from the card’s credit history without being responsible for payments. When you have a credit card, you are the primary cardholder, which means you are responsible for payments, credit utilization , and whose account it is. The authorized user has no control over the account.