If you are thinking about signing up for an Authorized user account, you may be wondering how these accounts can improve your credit score. Authorized users don't have to pay monthly payments because they aren't legally responsible for any balances on accounts they have been given permission to use. They can however build their credit history by using a creditcard for purchases.
Authorized users make purchases on their own
It can be a smart idea to add a child or teenager as an authorized user to a credit card. This is a great way to teach them about personal finance, debt management, and responsible borrowing. These lessons are essential for young people, particularly college students. Though it may seem smart to add a student in your account, it can also be confusing.
A large impact can be made to your credit score by adding an authorized user. Credit utilization plays a major role in determining your credit score. If you have a $1,000 credit limit and you spend $300 each month on your statement, that means you are using 30% of your credit limit. Adding an authorized user to your account will help you lower your overall utilization.
They're not legally liable for the balance
An authorized user isn't legally responsible for the balance on the card unless they make unauthorized purchases or charge an item on the account that the original cardholder isn't authorized to make. In some states, however, the debt can be owed by the spouse of the authorized user if the cardholder is incapacitated. In addition, in community property states, an authorized user may be a joint account holder and therefore equally responsible for the debt on the account.
They can also remove an authorized user from a primary account if they don't want them to be charged anything. It is usually as simple as calling or sending an email request. Some card issuers do not allow authorized users to be removed from their accounts.
They don’t have to pay every month
It's possible to build credit by adding an authorized user on your credit card account. Authorized users get to piggyback on the credit history and good payments of the primary cardholder. As long as the primary cardholder makes all of his or her payments on time, the authorized user should see a positive history on their credit report. Not all credit card issuers report authorized users to credit bureaus.
One option for you is to add a family member to your credit card. You can trust that this person will not use your credit card for unneeded purchases. The card can be kept as long the credit limit is maintained.
They can make a credit record
It is important to be responsible when using someone else's credit-card card. Although this type of account has some advantages, it is still not a great idea to use it recklessly. You can improve your credit score if you use it responsibly.
Adding an authorized user to your credit card account can improve your credit score, which in turn will improve your access to products and lower rates. You can also have a negative impact on your credit score if late payments or missed payments are made. Consider applying for a secure credit card in this instance.