How Being an ‘Authorized User’ Helps Build Your Credit

If you have bad credit or little credit, you're probably finding yourself in a bit of a pickle. You need to be extended credit in order to build credit, but few are willing to lend you credit because your credit profile is poor or nonexistent. If this describes your situation, you might be wondering if becoming an authorized user helps build your credit.

The answer is: it depends.

Becoming an authorized user can potentially benefit your credit score if the primary holder of the account is a responsible borrower. On the other hand, there is also the potential that authorized user status won't change your credit score at all or even lower your score.

There are some situations where becoming an authorized user can be a very useful tool for building credit. At the same time, it's not a flippant decision you want to make. Let's take a look at what you need to know about becoming an authorized user.

How You Can Build Your Credit as an 'Authorized User'

Before you run and ask a family member to add you as an authorized user, it's worth understanding that there are three potential outcomes for your credit when you become an authorized user:

• Your credit score goes up
• Your credit score goes down
• Your credit score stays the same

Given the fact that becoming an authorized user can potentially have no effect or even a negative effect on your credit, you might be wondering if this is an avenue worth pursuing.

How to Determine If Becoming an Authorized User Is Right For You

To determine whether it makes sense for you, you'll want to consider the following two factors:

• Whether or not the credit card issuer or lender reports authorized users to the credit reporting agencies
• Whether or not the account will be used responsibly by both the main account holder and the authorized user (you)

The credit card issuer or lender will need to report the account in question to the credit bureaus in order to become an authorized user to impact your credit. Your credit score won't budge one way or the other if they aren't reporting to Equifax, Experian, and/or TransUnion.

If the lender or issuer does report to the credit bureaus, the next important question is whether or not activity on the account will help or hurt your credit. The primary account holder and you, as the authorized user, must practice responsible credit habits in order to receive a beneficial boost to your credit.

How Authorized Users Build Credit

By being added to another person's credit account, an authorized user can potentially enjoy a boost to their credit score and file. When the primary account holder has a good credit history and responsibly uses credit, authorized users can benefit from this positive credit activity.

For example:

• If the main account holder always pays their bills on time and keeps low balances on their cards, this can help the authorized user's credit.

On the other hand, if the original cardholder is missing payments, maxing out their cards, and getting calls from debt collectors, the credit of the authorized user can suffer. For this reason, it's essential to make sure you're attaching your own credit profile to the account of an individual that makes responsible borrowing decisions.

Becoming an Authorized User: An Overview

Does becoming an authorized user seem like a promising way for you to build and boost your credit? Let's explore some basic questions about the process and how you can use authorized user status to your advantage.

What Is an Authorized User?

If you're the authorized user on another person's credit card account, it means that you have permission to make purchases on their account. In order to become an authorized user, the primary account holder needs to sign off on the authorization. You'll then usually get your own credit card with your own name on it that's linked to the main account.

In most cases, authorized users won't get a bill every month. Instead, these will go to the primary account holder. Authorized users, therefore, usually need to set up their own payment agreement with the original cardholder.

When you're added as an authorized user, the credit account will usually show up on your credit reports. This can help improve your credit if the main account holder pays their bills on time and keeps a low account balance.

There are some credit cards that have a special feature just for accounts with authorized users, though. In these cases, the bill will note which purchases were made by the authorized user, so its easier to divvy up the bill.

Who Can Be an Authorized User?

Technically, anyone can become the authorized user of another individual's credit card if the original cardholder gives it the green light. In most cases, though, authorized users are family members or close friends of the primary account holder.

It's useful to keep this in mind when you're thinking about who you could ask to be added as an authorized user. When someone allows you to be an authorized user on their account, they are attaching their own credit profile to yours. This means that even if you practice perfect credit habits, your credit can get dragged down by late payments, charge-offs, and other derogatory marks associated with the account.

Who Should You Ask to Add You as an Authorized User?

When you're thinking about becoming an authorized user to build credit, one question that will quickly come to mind is who you should ask.

Since your spending behavior can impact the credit of the primary account holder, authorized users are usually attached to the accounts of close family members or trusted friends.

This isn't a question you'll want to take lightly. Adding yourself to the right person's account can have its benefits, but choosing the wrong person can mean your credit is actually harmed rather than helped.

Here are the primary considerations you'll want to keep in mind when deciding who to ask:

• They should always pay their bills on time
• They should keep their credit utilization low
• They should be someone you trust

Beyond that, it's important to recognize that becoming an authorized user is a responsibility that can impact the relationship you have with the primary account holder. For example, if you don't stick with the payment plan the two of you agreed on, this can create tension and strain.

Is There a Minimum Age For Being Added as an Authorized User?

There aren't any laws that outline a minimum age at which an individual can gain authorized user status. At the same time, most banks are going to have their own policies about the minimum age of authorized users.

Here are the minimum authorized user age requirements for some of the major credit card issuers in the US, along with the information needed to be added to an account:

• Capital One: No minimum age requirement. Full name, date of birth, and Social Security number.
• American Express: 13 years old. Full name, date of birth, and Social Security number.
• U.S. Bank: 16 years old. Full name, date of birth, and Social Security number.
• Discover: 15 years old. Full name, date of birth, and Social Security number.
• Bank of America: No minimum age requirement. Full name, date of birth, and Social Security number.
• Citi Bank: No minimum age requirement. Full name and date of birth.
• Chase: No minimum age requirement.
• Wells Fargo: No minimum age requirement. Full name and date of birth.

Will I Have a Spending Limit as an Authorized User?

The credit limit on the particular card you are an authorized user for will also apply to you-- the purchases of both you and the primary account holder can't amount to more than the credit limit.

However, some card issuers will allow the primary account holder to set spending limits for authorized users. This means that you might not have access to the full credit limit depending on the credit card issuer and whether the main cardholder decides to limit your spending.

Even if there isn't a way to limit authorized users spending via the card issuer, it's a good idea to have a conversation about this with the main account holder. Coming to a clear agreement about how much credit you have access to each month can help ensure your authorized user status doesn't lead to tension and strife in your relationship.

How to Become an Authorized User in Three Steps

The steps are quite simple if you already know who you'd like to ask to become an authorized user.

1. Ask to Be Added as an Authorized User

The first step is to talk to the relative or trusted friend that you are hoping will add you as an individual authorized to use their account. You'll want this person to have good credit and practice healthy credit habits.

Before going through the trouble of being given authorized user status on a card, make sure the credit card issuer will report authorized users to the credit bureaus. In some cases, people with authorized user status don't have their information sent to the credit reporting agencies.

If they agree, they can contact the credit issuer to set you up with authorized user status. It's worth noting that not all card companies will report authorized users' activity to the credit bureaus. To make sure you can actually benefit from being an authorized user, ask the main cardholder to verify this information with the bank.

2. Formulate a Payment Strategy

Usually, only the primary account holder will receive the bill and is the one solely responsible for making payments. If they don't pay their bills on time, this can negatively impact both of your credit scores.

The last thing you want is for there to be any confusion about who's paying for what. If you're planning on using available credit each month with the card, make sure you talk to the original cardholder about if and how you will pay them back. Check with them to see if they have autopay set up or otherwise have a secure payment plan in place.

3. Communicate With the Main Account Holder

I can't stress enough just how important it is to communicate clearly with the primary cardholder. If there is any uncertainty about how much you can spend each month or how you'll deal with repayment, you'll want to have a conversation about these things ASAP.

An authorized user doesn't actually have to use the card to receive the benefits to their credit profile. In some cases, the primary account holder might be more comfortable if you don't have access to their credit limit. Whatever arrangement you agree to, make sure there is a clear understanding between the two of you to ensure this process doesn't strain your relationship.

How to Build Credit as an Authorized User

As we've discussed above, becoming an authorized user in itself won't necessarily increase your credit score. Here are some things to keep in mind to ensure that adding the account to your credit report is a positive move for your financial well-being:

1. Spend Responsibly

Usually, the primary account holder will give you access to their credit limit when you're added as an authorized user. It's important to have a conversation with the original cardholder about how much you will spend each month and honor the agreement you've made with them. If you rack up a big balance on the card, it could mean they start accruing interest on the account or struggle to pay the bill on time. This is obviously undesirable for a number of reasons, including the fact that it could negatively impact your credit.

2. Make On-Time Payments

Whether you're responsible for paying part of the bill or the primary account holder is the one making the payment, it's essential that the bill for the account is paid on time every month. Even one or two missed payments can ding your credit score.

3. Watch Your Credit Report

You can check your credit report for free using AnnualCreditReport.com. This is a site created by the three major credit bureaus and authorized by Federal law.

The new account won't show up right away-- how long it takes for it to appear depends on when the credit card issuer reports to the bureaus.

Check your report regularly to keep an eye out for any errors or inaccuracies to ensure your credit profile is in tip-top shape.

The Pros and Cons of Being an Authorized User

Being an authorized user can be a useful tool for building your credit profile. At the same time, there are risks involved that you'll want to know about before making a decision. Let's check in with both the benefits and drawbacks to help you make an informed choice.

Benefits

Is it really worth becoming an authorized user? The answer depends on your own credit profile and a number of other factors.

In general, though, the most substantial benefits of being an authorized user are:

• Reducing your credit utilization to boost your credit score: The primary perk of becoming an authorized user is that it can help lower your credit utilization ratio and increase your credit score. You can potentially grow your credit by attaching your name to the account of a trusted family member or friend with strong credit.
• Gaining access to credit without a credit check: When you have no credit or poor credit, it can be hard to gain access to credit. Only basic personal information is required to become an authorized user-- it typically doesn't involve a credit check. If you've been trying to figure out how to have access to a line of credit, this is an accessible path.
• Allowing you to start building credit: For individuals that aren't old enough to get a card of their own or that have a thin credit profile, becoming an authorized user can help build a strong foundation to build upon down the road.
• Earning extra rewards for the primary cardholder: If the authorized user has access to the line of credit, they can help the primary cardholder earn additional rewards. Of course, this is only meaningful if the extra spending costs can be covered in a timely fashion. Otherwise, additional interest fees and potential late payment charges could quickly remove the perks of the rewards.

Drawbacks

Becoming an authorized user isn't always a good idea. Beyond that, it can be a big decision for the primary account holder to decide to add someone else to their account.

Let's look at some of the cons of becoming an authorized user or allowing someone to be an authorized user on a credit card.

• Can increase annual fees: If a credit card already has annual fees, there will sometimes be an additional fee for each authorized user on the account. This can mean it's a lot less attractive for the primary account holder to add you as an authorized user. If you are motivated to gain authorized user status, you might suggest covering the additional fees.
• Age requirements can limit your options: As discussed above, some credit card issuers have age requirements for authorized users. You'll want to double-check with the card company to make sure you meet their criteria.
• Primary account holders are responsible if you fail to pay: When you spend money on someone else's credit card as an authorized user, they're ultimately responsible for footing the bill. Discussing the ground rules ahead of time can help ensure the original cardholder isn't saddled with a bill they can't afford. In order to make sure this financial relationship pans out, communication is key.
• Can lead to relationship problems: Mixing money with friendship or familial relationships is always a tricky business. If the arrangement is mismanaged or there are misunderstandings, it can lead to a lot of tension. It's important to proceed with caution and care when becoming an authorized user on someone else's account to avoid potential relationship issues.

Authorized User FAQ

Finally, let's take a look at some of the most common questions I receive about using authorized user status to build credit.

Is a Co-Signer and an Authorized User the Same Thing?

When you're trying to figure out how to build credit, you may have also come across the term "co-signer." Co-signers and authorized users aren't the same thing, but they both are useful tools you can use to help you start your credit history when your credit profile is thin.

Here are some of the primary differences between these two options:

• Becoming an authorized user doesn't require a credit check while earning card approval with a co-signer does require a credit check.
• The primary cardholder is legally liable for paying the debt when you're an authorized user. At the same time, you are legally liable for paying the debt when you receive a line of credit with a co-signer. If you can't pay, though, the co-signer is legally liable.
• Your payment history will usually (but not always) be reported to credit bureaus as an authorized user. When you receive access to a line of credit with a co-signer, your payment history will always be reported to the credit bureaus.

When you become an authorized user, you're being added to an existing account. When you apply for a loan with a co-signer, you're requested to open a brand new account in your own name. The co-signer is "signing on" to say that they will foot the bill if you don't pay up.

Is a Joint Account and an Authorized User the Same Thing?

Another concept that is similar to that of an authorized user is the joint account.

Joint account holders have more responsibility than authorized users. When you open a joint account with someone else, you are legally responsible for repaying the debt.

It's more difficult to be approved as a joint account holder than as someone authorized to use another person's count. The process will be basically identical to the one you'll go through if you apply for a card on your own.

Joint accounts are most frequently used by spouses that combine their finances. Authorized user status, on the other hand, is more common as a way for parents that are trying to help their kids build credit.

What Are Some Alternatives to Becoming an Authorized User?

After reading through this guide, you might feel like this isn't the best choice as a credit-building method. Whether you don't want to risk screwing up a relationship over credit card payments or you don't know anyone trustworthy enough to ask, you'll be glad to know there are some other options on the table.

If your primary goal is building your credit score, consider these alternatives:

• Apply for a secured credit card: Secured credit cards are less risky to the issuer because they require a cash deposit. This is a great way to start building a healthy profile if you have no credit or bad credit.
• Apply for a credit-builder loan: You don't have to have good credit to be approved for a credit-builder loan. These are usually offered by community banks and credit unions rather than the big banks.
• Apply for a store credit card: The approval requirements for store credit cards offered by major retailers are usually more lenient.
• Apply for a card with a co-signer: Though applying with a co-signer shares many of the same drawbacks of being a user authorized on another account, you might find this is a more appealing option depending on your circumstance.
• Report your rent and utility payments to the credit bureaus: You can report your monthly bill payments to the credit bureaus to help you build a positive track record of on-time payments. Services like Experian Boost and eCredable Lift allow you to add utility payments to your credit report. In contrast, services like Rent Reporters and LevelCredit can be used to add rent payments to your credit report.

Demystifying Credit Building

When someone you know and trust adds you as an authorized user on their account, it can help you build credit so long as they are responsible for a borrower-- aka paying their bill on time and keeping a low balance. Attaching yourself to another person's credit card account can potentially create relationship issues if you don't set clear ground rules and communicate openly. So long as you are able to reach an agreement that you are both comfortable with, though, becoming an authorized user can be a great way to add positive information to your credit profile.

The state of your credit can have a big impact on your life-- impacting everything from which house you can buy or apartment you can rent to the interest rates you pay on your credit cards.

• Gaining a deeper understanding of how credit works can help you build and improve your credit over time.

For more information about how you can increase your credit score and clean up your credit report, check out our Credit Building Tips blog!

Related posts:

How to Build Credit History Faster Than Usual What Hurts Your Credit Score? Length of Credit History: What Is Considered a "Good" Length? FAQ: How Do Tradelines Work, and Are They Legal to Use? How to Get a Cell Phone With Bad Credit (And Low or No Deposit) How to Build Credit When You Have No Credit History