You may be curious about how Authorized User accounts can help 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. However, credit card purchases can help build credit histories.
Authorized users can purchase 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 for them to learn about personal finance, borrowing responsibly, and how to manage their debt. These lessons are very important for 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 is a key factor in determining credit scores. You'd use 30% of your credit limit if you had a credit limit $1,000 and made $300 per month. The best way to reduce your overall utilization is to add an authorized user.
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. However, in some states, a spouse of an authorized user can be held liable for the debt if the cardholder dies. A community property state may allow an authorized user to be a joint account holder, and therefore share the responsibility for the account's debt.
If the primary account holder does not want any authorized users to charge anything, they have the option of removing them. Typically, it is as easy as making a phone call or submitting an online request. Some card issuers limit the ability of authorized users to be removed.
They don't have to make payments every month
The good news is that adding an authorized user to your credit card account can help you build credit. Authorized users get to piggyback on the credit history and good payments of the primary cardholder. The authorized user will see a positive credit score as long they make all their payments on-time. However, credit card issuers do not always report authorized accounts to credit bureaus.
A family member can be added to your credit cards. This person will not be able to use the card for any unrelated purchases. As long as he or she stays within the credit limit, you can keep the card.
They can establish credit history
If you are considering becoming an authorized user of someone else's credit card, you need to be careful with the way you use the card. 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.
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.