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How Being an Authorized User Impacts Credit Score

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Credit Sesame discusses how being an authorized user can impact credit score.

Your credit score can get a worthwhile boost when you’re an authorized user on someone else’s credit card account. However, this works better in some cases than others and there are a few potential pitfalls you should know about.

What is an authorized user?

You become an authorized user when you’re added to someone else’s credit card account with their permission. The card company issues a new card in your name.

However, that company normally mails the card to the account holder. So, it’s up to that person, the primary cardholder, to decide whether to give it to you. If it’s your mom or dad, they may choose whether to hand over yours based on how responsibly you’ve managed money in the past.

According to Experian, one of the three biggest credit bureaus in the United States, you do need to use the card occasionally for your score to benefit. So, you need to agree with the main cardholder on how you may use the card, for example, at family dinners in a restaurant or when you fill up with gas.

Anyone can become an authorized user, regardless of their credit history. You need to meet the card issuer’s minimum age requirements and some card issuers cap the number of additional users on any one account.

Some credit card companies charge a fee for issuing a card to a secondary user. The size of those fees varies widely. The account holder may wish to take that into account.

Being an authorized user differs from opening a new joint account or co-signing. With those, both the signers are legally responsible for the account. But when you’re a user on someone else’s account, only the account holder is legally liable for all the charges, including yours — even if they die.

How can being an authorized user helps your score?

Once your name is registered on someone else’s account, you effectively piggyback on that person’s responsible behaviors. Remember, someone has to use your card occasionally (perhaps once or twice a month) to get this benefit.

Every time you or the primary cardholder makes an on-time payment on that credit card and keeps its balance low compared to its credit limit, it appears on your credit report and may improve your score over time.

Of course, if the account holder gets into financial trouble, any late payments or high balances also appear on your report. Those are likely to affect your score adversely.

Naturally, if you display bad behaviors on other accounts listed on your credit report, the impact of piggybacking on the card account is severely blunted. The negative effects of those may swamp the positive ones you gain by being an authorized user. Unless you exhibit good credit management across all your debt accounts, your credit score is likely to keep falling, though perhaps not quite as quickly.

How big are the gains from being an authorized user?

There’s some evidence that being an authorized user boosts credit scores in the real world. A 2019 survey of U.S. adults ages 20 to 29 “found a direct correlation between people who had been added as authorized users and good credit scores.”

You should take the more detailed results of this survey with a pinch of salt because the number of respondents was small. However, with that caveat, the poll revealed:

  • 13% of authorized users had credit scores below 600 versus 24.6% of those who were not authorized users.
  • 46.4% of authorized users had scores of 680 or above compared with 27.7% of those who were not.

If those numbers are correct across the wider population, then asking a great money manager to add you to a card account seems to be a good idea.

Do the gains vary depending on credit score starting point?

People in some circumstances likely benefit more than others from these arrangements. For example, young people with little or no credit history may get the biggest boost.

This is a common situation for younger adults. They can’t build a credit score without open credit accounts. And they can’t open a credit account without a decent credit score. This Catch-22 situation is called having a “thin file” in the industry jargon.

There are various ways to build credit from scratch, including the free Sesame Cash debit card. But becoming an authorized user on a credit card can appreciably accelerate the process.

It may take longer for those with excellent credit to reap the rewards. Your score can go only so high, and you already have so much good stuff going on that being an authorized user may provide only a minor though consistent boost.

Similarly, having a very low credit score can also slow the positive impact of piggybacking on someone else’s credit. That’s the case if your low score is a result of lots of recent negative items on your credit report.

Those become increasingly unimportant over time — until they eventually drop off your report, often after seven years. But it takes some time for them to fade. In the meantime, the improvements gained from being an authorized user may be slowed or negated by your past poor credit behavior.

Most (but not all) credit cards work

Before your parent, friend or whoever is willing to authorize your use of their credit card applies, ask them to check one thing. They need to call the card issuer to make sure it reports the account’s status to all the big three credit bureaus — aka credit reporting agencies.

Those are Equifax, Experian and TransUnion. They calculate your credit score using information on the credit report maintained on you by each of those three. So, you may have a different score from each, depending on which of them your existing lenders furnish information.

When a new lender decides whether to lend to you and what interest rate to charge, it consults one, two or all three of those bureaus.

So, if the card issuer reports to only one of those and your lender checks with one of the other two, your score won’t have benefited from your being an authorized user.

Most credit card companies report to all three. But not all do. So get the account holder to check before getting you a card that might prove useless.

Potential drawbacks if you are the authorized user

There are a couple of potential drawbacks to piggybacking on someone else’s credit card. The first is one we’ve already mentioned: If that account holder gets into financial trouble and sees his or her score plummet, yours will be damaged, too.

So, find someone who’s been a good money manager in the past and whose future financial prospects look bright. And don’t hesitate to cease your authorized use as soon as anything goes wrong. When you delete yourself from the account, this is one of the very few times that the credit card company is likely to take instructions directly from you.

The only other serious downside for you is the risk your actions pose to the account holder and your relationship with him or her. Presumably, that person is a friend or family. Who else might let you loose with their card?

If you go rogue with the card and run up huge balances, that person is liable for the resulting payments. But, entirely separately, your excessive usage could inadvertently harm your friend or relation’s own credit score, even if he or she doesn’t mind your charges.

Do you want to take that risk of damaging a relationship?

Potential drawbacks if you are the account holder

The potential downsides of these arrangements for the account holder can be more serious. To start with, you might have to pay a fee to get a secondary card.

But the main risk is the possibility of the authorized user running up huge charges on your account.

You are legally liable for all those charges. And you may struggle to recover them from the person who ran them up.

Because you might find it tough to prove in a civil or criminal court that certain charges were unauthorized. After all, the person who made them was someone whom you explicitly named as authorized.

Still, you can easily revoke your authorization at any time. A federal regulator suggests:

First, call customer service and ask that the authorized user be removed from your account. You can also ask the card issuer if you should get a new card with a new number. This may be a good idea if the authorized user has your card number.

— Consumer Financial Protection Bureau, “How do I remove an authorized user from my credit card account?” – Aug. 27, 2020

Credit utilization

You could also trip up over something called “credit utilization.” This is your balance as a percentage of your card’s credit limit.

So, suppose you have a card with a $10,000 limit. And, one month, your balance is $3,000. Your credit utilization ratio would be 30% that month.

That’s generally fine. Most credit experts urge you to keep your credit utilization ratio at or below 30%, though some urge you to maintain it at 10% or under especially when you’re working on your score.

But what happens if the additional charges made by your authorized user increase your ratio? Your score might suffer.

One solution is to ask your card issuer to increase your credit limit when you add your new user. That may push your credit score a little higher because you’re applying for “new” credit. But it should typically be back to normal within a few months.

Choose wisely

Should this put you off adding a user to your card account? Of course not, on two conditions:

  • The person is a good money manager and trustworthy (the two aren’t always the same)
  • You are willing to accept the risks

This could be your chance to truly help someone who’s important to you. But be sensible when deciding to do so.

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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

Peter Warden
Peter Warden has been writing for 14 years about personal finance, credit cards, mortgages and insurance. His work has appeared across a wide range of media, and he is an editor at The Mortgage Reports. He lives in a small town with his partner of 30 years.

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