You may be curious about how Authorized User accounts can help improve your credit score. Authorized users are not legally responsible for the balance on the account they have been authorized to use, so they do not have to make monthly payments. They can however build their credit history by using a creditcard for purchases.
Authorized users make purchases on their own
It is a smart move to add your child or teen as an authorized credit card user when they are old enough. This is a great way to teach them about personal finance, debt management, and responsible borrowing. These lessons are very important for college students. Although it is a smart move to add a student, it can be difficult.
Adding an authorized user can have a large impact on your credit score. Credit utilization plays a major role in determining your credit score. Consider this: If your credit limit is $1,000, but you make $300 every month, your credit utilization is 30%. An authorized user can be added to your account to help reduce your overall utilization.
They are not legally responsible for the balance
A cardholder authorized user is not legally responsible for any balance on the card, unless they make unauthorized purchases and charge an item that the original cardholder hasn't authorized. A spouse of an authorized user may be held responsible in some states for the debt if they die. In community property states, the authorized user could also be a joint account owner and therefore equally responsible.
If the primary account holder doesn't want an authorized user to charge anything, they can remove them. Typically, it is as easy as making a phone call or submitting an online request. Some card issuers restrict the ability to remove authorized users.
They don’t need to pay monthly
It's possible to build credit by adding an authorized user on your credit card account. Authorized users benefit from the positive payment history of a primary account holder. An authorized user should have a positive credit record as long the primary cardholder continues to make all payments on time. Some credit card issuers may not report authorized user accounts.
One option for you is to add a family member to your credit card. This person will not be able to use the card for any unrelated purchases. The card can be kept as long the credit limit is maintained.
They can build a credit history
Be careful when you're considering being an authorized user for someone else's credit cards. While this account may have some positives, it's still not a wise idea to use it in an impulsive manner. You can improve your credit score if you use it responsibly.
A credit card account that has an authorized user can help improve credit scores. This will lead to lower rates and better access to products. You can also have a negative impact on your credit score if late payments or missed payments are made. You might want to apply for a secured credit line instead.