Having friends has its perks, especially if that friend lets you be an authorized user on their credit card.
If you're thinking of asking someone you trust to be added as an authorized user on one of their cards, it's important to know what you're getting into with this decision. Instead of getting your own credit card, you may be thinking of taking this step so that you have access to a card when you need it. There are advantages and disadvantages to being an authorized user. Keep reading to learn the pros and cons of being an authorized user on a credit card.
What is an authorized user?
An authorized user is someone who has permission to use a credit card account. While they're legally able to use the credit card, they're not responsible for paying off the credit card debt. Most top credit card issuers allow their cardholders to add an authorized user to their account.
Can anyone be added as an authorized user?
Most credit card issuers have age requirements in place for authorized users. Other than that, there aren't restrictions.
The pros of being an authorized user
Being an authorized user on a credit card has its advantages:
- This can help build credit. For someone with little or no credit, being added as an authorized user can help them build a good credit score. That's because many credit card companies report the history of the account on an authorized user's credit report. This can be helpful in the future when you attempt to open your own credit card account.
- It gives a person access to a credit card. With poor credit history or a bad credit score, it can be challenging to get a credit card. Being added as an authorized user can give you access to a credit card, which can be especially helpful during an emergency.
- You can learn how to manage money. Being an authorized user is a great way to learn how to manage money better. You can learn how to make smart financial decisions before opening your own credit account.
The cons of being an authorized user
Here's what you need to look out for:
- The account holder's actions can negatively impact your credit. If the credit cardholder misses payments or racks up a lot of debt on the card, it could negatively impact your credit. Before being added as an authorized user, it's a smart idea to consider whether the credit cardholder is financially responsible.
- They can remove you at any time. The credit cardholder can remove you as an authorized user at any time. When this happens, that account will no longer appear on your credit report. This is something to consider if you want to build your credit.
- It could cause relationship issues. If you and the cardholder disagree about which charges you've made or how much you owe them, this could cause added stress and could lead to relationship issues. Consider setting clear boundaries and ways to track purchases made so that you minimize disagreements or confusion.
The bottom line
Being added as an authorized user may be a good option for you. But, you need to be well aware of the positives and negatives. Talk with someone you trust about this opportunity and outline expectations and rules. Then you can both decide if it's the right move to make.
FAQs
The pros of adding an authorized user to a credit card outweigh the cons in most cases. The primary pro of adding an authorized user to an account is that it allows the authorized user to build credit, while the biggest con is that you are responsible for any purchases the authorized user makes.
Is there a downside to being an authorized user? ›
Cons of becoming an authorized user
The primary account holder is ultimately responsible for repaying all charges made with the credit card. So if you charge a substantial amount and struggle to pay your portion of the bill, the primary cardholder will have to cover it.
Is it a bad idea to add an authorized user to a credit card? ›
Because each user's behavior has the potential to affect the other's credit score, primary cardholders should only add authorized users they trust to be responsible with their credit.
Why did my credit score drop when I was added as an authorized user? ›
While becoming an authorized user can help your credit, there are times when it can have the opposite effect. For instance, if you're added to an account that has a history of missed payments or the credit utilization ratio is too high, your credit score could fall.
Does removing someone as an authorized user hurt their credit? ›
Will removing an authorized user hurt their credit? It depends on the situation. If the card in question has been well maintained with on-time payments and low credit utilization, removing the authorized user from the account will effectively erase that positive payment history from their credit report.
What are the risks of being an authorized user? ›
If the issue does report it, then being an authorized user can hurt you just as easily as it can help you — because now your score is tied to the habits of another person. Piggybacking on someone else's credit card account can backfire if the primary cardholder pays the bill late or runs up a big balance, for example.
When should I stop being an authorized user? ›
End the relationship early, if necessary
And even if you are only the authorized user on the account, that high balance could become part of your credit history. “If a primary cardholder runs up a high balance and intends to carry said balance for a long time, it's likely best to part ways,” says Delva-Gonzalez.
How fast will my credit score go up as an authorized user? ›
According to a 2018 study done by Credit Sesame, people who had a fair credit score saw their credit score improve nearly 11% just three months after becoming an authorized user on someone's credit card.
Do authorized users build credit? ›
Becoming an authorized user on someone else's credit card account is a strategy for improving credit quickly. It works best if the primary user's card has a long record of on-time payments and a high credit limit and the authorized user doesn't have recent blemishes on their credit report.
Does being an authorized user increase your credit limit? ›
If you have balances on credit cards of your own, adding an authorized user account with a high credit limit and/or a low balance could lower your utilization rate and benefit your credit score: The total amount of credit available to you will increase by the amount of the unused credit on the card (and your total ...
2. Being an Authorized User Might Not Impact Your Credit. Credit scoring models only consider information that's currently on your credit report—nothing more and nothing less. So, in order for a credit card to affect your scores, it must show up on your credit reports with Equifax, TransUnion and Experian.
Can an authorized user be held responsible for debt? ›
An authorized user has no liability whatsoever. Authorized users can make charges, but they aren't responsible for bill payments. The primary cardholder has complete liability and is responsible for making payments, redeeming rewards, requesting credit limit increases, etc.
Does adding my child as an authorized user help their credit score? ›
As an authorized user, your credit card will build your kids' credit history. The credit card usage and payment history will be added to their credit profile. This will help them when it comes time to apply for their own credit card or other types of credit.
Will adding someone as an authorized user help their credit capital one? ›
Adding a user won't impact your credit score—only the usual factors like payment history and available credit do that. As long as you and your user use your card responsibly and make payments on time, these actions can have a positive impact on your user's score.
Does being an authorized user affect your credit limit? ›
Being an authorized user can help you build credit—increasing your credit age, overall credit limit and history of on-time payments—but creditors will also want to see that you're up to the task of repaying the money you borrow.
Does being an authorized user go on your credit report? ›
A card issuer must report the authorized user account to the three nationwide consumer reporting agencies (Equifax, TransUnion and Experian) in order for it to appear on your credit report. If the card issuer does not report the activity, being an authorized user will have no effect on your credit.
Will adding my child as an authorized user help his credit? ›
As an authorized user, your credit card will build your kids' credit history. The credit card usage and payment history will be added to their credit profile. This will help them when it comes time to apply for their own credit card or other types of credit. Earn rewards for their spending.
