A customer with poor or no credit can have a difficult time raising their credit score without a line of credit — but it’s not impossible. If you need to get quick access to credit, say to get a car loan or qualify for an apartment lease, having someone cosign is a quick option to get around a low credit score. For building credit day to day, a secured credit card can help, though it could take years to build a good credit history.
A quicker strategy is a mixture of these two options. You can become an authorized user on a friend or family member’s existing credit card account. As part of week seven of the Credit Score Challenge, see how becoming or adding an authorized user on an existing line of credit can affect your credit score.
Why Become an Authorized User on a Credit Card
1. Being an authorized user can raise your credit score.
Following the authorized user credit score strategy allows you to charge money to the primary holder’s card as if it was your own account. But how does being an authorized user help your credit?
For one, the credit account you use will show up on your report, allowing you to build a credit history. Spend your money wisely and when it comes time to pay your monthly balance, reimburse your portion of the bill. Timely payments on the credit card will positively affect your credit score.
You’ll want to check on the scoring model used by the card’s provider. The VantageScore 3.0 model, for instance, includes positive credit activity from authorized users. The FICO model includes both positive and negative behavior from authorized card users.
2. An authorized user instantly gets a credit history.
When you become an authorized user on a credit account, the entire history of that account shows up on your report. When an older credit account is added to your credit history, your report will show an increase in the average age of accounts you’ve managed, potentially increasing your credit score, according to ABC News.
3. You’re not responsible for the account holder’s activity.
As an authorized user on a credit account, you’re not liable for negative balances or charges. The credit card provider won’t ever ask you to cover payments owed. Authorized users can also back out at any time and have their names removed from accounts if the primary cardholders are irresponsible.
4. Account holders aren’t affected by an authorized user’s credit history.
While an authorized user is not liable for your credit behavior, you’re not liable for their past credit history. However, an authorized user’s spending behavior might have an indirect effect on your credit, so be careful who you sign on.
Adding an Authorized User: What Affects Your Credit Score
1. Account holders hold full responsibility.
An authorized card user isn’t liable for any charges or balances on made on an account. It is the account holder’s legal responsibility to make sure payments are made.
2. You can hurt an authorized user’s credit score.
A primary cardholder’s actions can affect the credit score of an authorized user. If you’ve added your son or daughter to your account, for example, but have maxed out your credit card or fallen behind on payments, you might hurt their credit score in addition to your own.
Credit Tips for Authorizing a User
- Figure out a payment strategy: If you plan to add an authorized user to your account, set up a reimbursement schedule. You can have your authorized user pay you directly. If you can entrust the user to have online account access, you can also arrange for them to hop online to pay their portion of the card’s balance each month.
- Use a low-maintenance account. A card with a generous credit limit and high penalty rates could open up too much risk. Even if you trust the user you are adding to your account, keep in mind that stumbles in account management can damage both of your credit scores. Opt for a credit card account that’s been open and active for a few years, has a lower balance-to-limit ratio, and has a history of being paid on time.
- Allow an authorized user by proxy. If you have reservations about authorizing someone to use your credit card, you can still add them to your account so they can benefit passively. Simply adding them by name as an authorized user without giving them a card to use can raise their credit score. You can always choose to give your authorized user a card to use in the future.
- Don’t overstay your welcome. If you become an authorized user on an account, keep in mind that you’ll someday need to open your own account. Lenders can become suspicious if you only hang onto someone else’s account. An authorized user status is only meant to be a temporary arrangement. Keep in mind that when you decide to open your own account, lenders will look to see if you’ve been a liable party on a credit account.
- Transition from authorized user to official cardholder. Think of an authorized user status as training wheels for the real deal. After you have spent a year or two on another person’s account, you will want to apply for your own credit card. Being an authorized user for a year or so will hopefully have increased your FICO score enough to make you an attractive customer for credit card providers. Before opening an account you’ll want to check your credit score to see where you stand.
Whether you’re adding an authorized user or becoming one, you’ll want to communicate often about account activity. If you’re both clear about how the account will be managed, you’ll be able to build each others’ credit scores while keeping your credit utilization low. If you can manage your credit card debt together, the authorized user will someday be able to have their own credit card.