Being an authorized user on someone else’s credit card may seem like a simple step toward financial freedom, but do you really know how it affects your credit score? Whether you have no credit history of your own or are just trying to reestablish the good credit you once had, you should learn more about authorized users and credit scores before you commit.
What is an Authorized User?
The ultimate risk in becoming an authorized user is in cases where negative information is reported on the account.
An authorized user is someone who has permission to use someone else’s credit card. They may be able to make payments and view account activity and transactions, but they may not make changes to contact information or add or remove another authorized user. However, it is the primary account holder’s responsibility to make payments on the account regardless of who did the borrowing.
Can Being an Authorized User Boost Your Credit Score?
When an authorized user is added to the primary account holder’s credit card, the account will appear on each individual’s credit report. In addition, on credit accounts where there is both a primary borrower and an authorized user, lenders and creditors can see which role you hold in regards to each account. Depending on the scoring model, your credit score may or may not reflect the account in which you are an authorized user.
Risks of Becoming an Authorized User
The ultimate risk in becoming an authorized user is in cases where negative information is reported on the account. If a potential lender or creditor uses a scoring model that takes all account information into consideration when this could negative impact your credit score. In addition, scoring models that do not weigh accounts in which you are an authorized user will get you closer, or further, from your goal of building up your credit score
When trying to build your own credit score, you may want to consider alternatives to being an authorized user. Opening a secured credit card or asking someone to co-sign for you on a loan is a sure-fire way to start banking your own credit history and reach the credit score that will eventually earn you the best rates on traditional credit cards and loans all on your own!