An authorized user on a credit card is a person who gets added to another person’s credit card account. Once you become an authorized user, you will have your own credit card. As an authorized user, you are not responsible to make payments on the account. However, you should spend responsibly and avoid any activities that will hurt the credit account of the primary account owner.
Being an authorized user on a credit card can help you build credit and credit scores. Most credit card issuers report authorized users’ activities to major credit reporting agencies(Equifax, TransUnion, and Experian) which help them put together your credit reports. Some information from your credit reports is used to calculate your credit score using credit scoring models such as FICO score or VantageScore.
The process of becoming an authorized user on a credit card account is easy and straightforward. What you should know, however, is that you cannot add yourself as an unauthorized user.
The primary account holder must add you to the account.
You can either complete the process online, call the card issuers or walk into their office in case of a bank, or credit union. Once you have been approved and added to the account, your own credit card linked to the original account will be mailed to you. You will then use your credit card just like everyone else.
Before you become an authorized user of a credit card, you need to understand how credit cards work. This is very important because credit cards are debts, and therefore, any activities associated with your card will affect the account.
You need to be on good terms with the original account holder. Just because you are not responsible for making payments, it does not mean you will do whatever you want. Make sure that you make your payments on time and agree with the original cardholder on what you can and cannot do with the card.
Some people make expensive purchases with their credit cards which increase their credit utilization and lower their credit score. Before you make such a purchase, make sure that the original account owner agrees with it. Most responsible account owners will not allow you to make expensive purchases using a credit card linked to their accounts.
It is also important to know why you need to be added as an authorized user. Do you want extra credit for your daily shopping, or do you want to build your credit? If you only need to build your credit history, then you might not need your own credit card. Any activity on the credit account will also benefit you whether or not you have a physical card.
Finally, pick an account with someone who has a good credit score. Bad credit scores and bad credit, in general, are linked to bad financial decisions and behaviors. If you become an authorized user with someone with bad credit, you might end up hurting your own credit.
Before you add someone as an authorized user, you need to have a plan and understand their financial behavior. As the primary account holder, you are responsible for all activities related to the account. The authorized user will have their credit card and make purchases. However, all activities will be reported to the original account(primary account) which you are responsible for.
Before you let anyone be an authorized user of your account, establish terms of what they are allowed to do with the card. If the user makes expensive purchases and fails to pay the balance, you will be responsible for that credit balance. If they spend extravagantly, you will be responsible for those bills. That is why you need to approve someone who is responsible.
Most credit card issuers do not charge a fee to become an authorized user. Others, however, can charge a fee for this service. Some lenders can charge as much as $75 or more annually to become an authorized user.
The authorized user is not responsible for activities related to the account. All responsibilities fall to the primary account owner. Any due payments, missed payments, credit limit increases, etc. fall to the account owner.
What you can do as an authorized user is make good financial decisions with your credit card. That is spend responsibly and avoid anything that can hurt the health of the original account.
Make sure that you pay the portion of the bill to the original account holder on time and in full. This way, you will be building good financial habits that will help you once you choose to have an account of your own.
Anyone can become an authorized user of a credit card account. Since credit card issuers have different rules associated with their financial products, there might be age requirements for the user. For example, if you are a parent, you can add your minor children to your credit card accounts as authorized users.
The age requirements may vary depending on your credit card issuers.
There are a lot of people who want to build credit but are afraid of credit card debts. Debt sucks and millions of people know a thing or two. So, if you have a spouse or a friend who has fear of debt but are responsible, you can add them to your credit account as authorized users. This could be a great way for them to build their credit history without getting credit cards
There are a lot of benefits to becoming an authorized user. Not only that you will get all perks associated with the card, but you will also get a chance to build your credit and credit scores. Any activities you make on the account will be reflected on your credit reports and credit scores (FICO score or VantageScore).
If you are not ready to get your own credit card, start by becoming an authorized user of a credit card account. As you become comfortable and learn how things work, you will later get your own card.
An authorized user is not responsible for the account activities. That responsibility falls to the primary car owner. However, it does not mean the authorized user is immune to risks.
Most lenders report authorized user activities to three major credit reporting agencies. Others don’t report this information at all.
If your lender reports your activities and you do not behave responsibly, that negative information will be on your credit reports. Eventually, that same information will wreck your credit history and lower your credit score. But, if your lender does not report authorized users to major bureaus, it is more likely that the authorized user will not be affected.
The original account owners, on the other hand, should always be careful about how their account is used. Every activity on the account is reflected on their credit reports. If an authorized user refused to make a payment, you must pay it off and ask them to pay you later. Otherwise, that payment could end up on your credit reports as late payments. As a result, your credit score will suffer badly and that late payment will stay on your credit report for 7 years.
The bottom line
If you are not ready to get your own credit card but want to build credit, you can start as an authorized user. The original account owner will add you to the account. As an authorized user, you are not responsible for account activities.
However, you should always pay your balances on time and spend responsibly. This way, you will not hurt the original account holder’s credit or end up hurting your own credit in case your card issuer reports authorized user activities to major bureaus.
