Will Adding an Authorized User Hurt My Credit?

Does being an authorized user affect your credit? Well, under the right circumstances, becoming an authorized user can help you build your credit. Before you agree to be an authorized user or add an authorized user to your account, it’s important to understand the potential risks and benefits. This article provides more information about how adding an authorized user works and how it could impact your credit.

In This Piece

• What Is an Authorized User?
• How Do Authorized Users Work?
• The Advantages Of Adding An Authorized User
• Can Authorized Users Hurt Your Credit?
• How To Add An Authorized User
• What to Consider about Authorized Users
• Best Practices For Managing Authorized Users 
• Add Authorized Users With Care 

What Is An Authorized User? 

An authorized user is a person who has the authority to use another person’s credit card account. In many cases, the authorized user receives a credit card in their name. Unlike co-signers and joint account holders, authorized users aren’t financially responsible for making payments.

Typically, cardholders only add someone they trust, such as a child or significant other, as an authorized user. There are a few reasons a cardholder might want to add an authorized user to their account, including:

• To help the person build their credit history
• To make it easier for the authorized user to make payments when the cardholder isn’t available
• To allow someone to make purchases on the cardholder’s behalf

The primary reason a person wants to become an authorized user is that they’re unable to secure a credit card on their own. For example, a child may not have the established credit to get a credit card, so a parent adds their child as an authorized user under their account.

Authorized Users Versus Joint Accounts

Authorized users aren’t the same as joint account holders. Authorized users can charge money to your account, but they can’t add other authorized users, and they can’t dispute charges. They also can’t request credit limit increases, transfer balances, or close your account.

In contrast, joint account holders can do all of those things and more. Joint account holders are jointly liable for the account, and they are also jointly liable for repayments.

How Do Authorized Users Work?

The process of adding an authorized user to your account varies between credit card companies. Some credit card providers may have age and other requirements that must be met before you can add an authorized user. You may also be able to set limits on how much the authorized user can charge to your credit card.

You’ll need basic information about the person you’re adding, such as name, date of birth, and Social Security number. You should contact your credit card company directly to see how this process works.

Once the application process is complete, the authorized user receives their card. They can use it just like any other credit card. Depending on the specific credit card company and your preferences, you may be able to give the authorized user access to your account information so they can track packages and report a lost card, errors, or potential fraud. 

Keep in mind that giving the authorized user access to your account may also allow them to see your purchase history and redeem special rewards. It’s important to note that authorized users don’t receive credit card bills and aren’t responsible for making payments. This responsibility lies solely with the cardholder.

The Advantages Of Adding An Authorized User

In some cases, adding an authorized user to a credit card can be a strategic and beneficial move for you and the person you’re adding. Here are the main advantages to expect. 

Building Credit Score

Being added as an authorized user on a credit card with a good credit history is a great way to establish credit or improve your credit score. If the primary cardholder makes on-time payments and maintains low credit utilization, that positive credit history will be reflected on the authorized user’s credit report. 

If you’re the one adding an authorized user to your credit card, there won’t be a significant impact on your credit report so long as you continue to make your payments on time and neither of you runs up a lot of debt. 

Convenience for Families

Adding an authorized user to a credit card can streamline shared expenses among family members. For instance, parents can add their children as authorized users to a family credit card, allowing them to have their first credit card while still retaining some oversight over the account as the main cardholder. 

Earn Additional Rewards

Adding additional users to a credit card can also boost reward-earning potential on credit cards. Many credit cards offer rewards programs, such as cash-back, travel points, or airline miles. Adding an authorized user may help you increase your rewards since you’ll have another person spending on your account. 

Improved Average Account Age

Another advantage to becoming an authorized user is the potential to improve your average account age. The length of your credit history is a factor in your credit score, and a longer age can positively impact you. Becoming an authorized user on a credit card account that’s older than any of your own can help improve your score. 

The Disadvantages Of Adding An Authorized User

When adding an authorized user to a credit card, it’s important to understand the potential drawbacks. Here are some disadvantages to be aware of. 

Impact on Primary Cardholder’s Credit

If the authorized user misuses the credit card, that can affect your score. Late payments, reckless spending, or exceeding the credit limit on your card will negatively impact you as the main account holder, potentially resulting in a bad credit score. Any activity from the authorized user will be reflected in your credit score, whether you made the purchases or not. 

Financial Responsibility

Adding an authorized user to a credit card comes with increased financial responsibility. As the primary cardholder, you’re ultimately liable for all charges made on the account, whether you or the authorized user made them. If the authorized user fails to make payments, you’re responsible for paying off the debt. 

Potential for Fraud

While the chance may be slim, adding an authorized user may increase the risk of credit card fraud. If the authorized user’s credit card information is compromised, it could lead to unauthorized charges on your account. While most credit card companies have fraud protection measures, it’s still important to be cautious and monitor your account activity closely. 

Can Adding Authorized Users Hurt Your Credit?

Before adding an authorized user to your credit card account, you need to ask yourself several questions.

• Does adding an authorized user affect my credit?
• Will adding an authorized user hurt my account?
• Will adding an authorized user help their credit?

The answer to these questions depends a lot on your specific credit card company. Not all credit card companies report authorized users to the credit bureaus. If your credit card company doesn’t report authorized users, adding them to your account will not impact their credit score. If, on the other hand, your credit card company does report authorized users, it can help them start building up credit.

Either way, adding an authorized user to your credit card account shouldn’t automatically affect your credit history. However, this step could hurt your credit score in several ways over time.

First, if the authorized user charges your credit card too much, you may have difficulty making your monthly payments. Payment history makes up 35% of your FICO® score. So, if you can’t make your monthly payment because of charges accrued by an authorized user, your credit profile and wallet could take a hit. If possible, set limits for how much your authorized user can charge to your credit card account. This step can help to reduce the risk of overspending.

Secondly, additional charges to your credit card account can also increase your credit utilization ratio. The more you charge to your credit card, the higher your credit utilization ratio is. Your outstanding debt accounts for about 30% of your overall credit score. You should try to keep your debt ratio under 30%.

How To Add An Authorized User

The specific steps for adding an authorized user to a credit card can vary depending on the issuer. However, most credit card companies will require similar steps. 

Here’s how to add an authorized user to a credit card: 

1. Provide age and identification documentation: You’ll need to provide proof of age and identification for the authorized user. Valid forms of ID usually include a government-issued ID like a driver’s license or passport. 
2. Set spending limits: Consider spending setting limits on how much the authorized user can charge to your credit card. 
3. Select a trustworthy authorized user: Choose a responsible individual you can trust to use the credit card responsibly. A teen with a steady job or a responsible adult family member could be good options. 

What to Consider About Authorized Users

If you want to build your credit by becoming an authorized user, start by talking to friends and family members you trust. Be sure the cardholder has good credit and makes on-time payments.

If a friend or family member agrees to add you as an authorized user, it’s important to set clear boundaries right from the start. For example, determine your credit limit right away and whether the cardholder wants you to ask for permission before using the card.

You also need to make a clear payment agreement. Determine exactly how much you’ll pay each month and when monthly payments are due. Make sure you create a budget so you know exactly how much you can afford to pay each month. Also, track your purchases so you know exactly how much you owe.

It’s crucial to have this agreement in place before becoming an authorized cardholder. This agreement allows you to know what’s expected of you. It can also help you determine if this is the right option.

Best Practices for Managing Authorized Users

To minimize any potential risks, it’s wise to follow best practices when adding and managing authorized users, including: 

• Set clear spending rules before you make family members authorized users.
• Talk to prospective authorized users about credit, including credit utilization.
• Set up text message alerts to make sure you know when authorized users make purchases.
• Remove authorized users if they don’t stick to the rules you make.
• Regularly review your credit card statements to identify any unusual activity. 
• Regularly check your credit reports to ensure no negative impacts from the authorized user’s activity. 
• Periodically assess the need for the authorized user status. If their circumstances change, you can remove them. 

Add Authorized Users With Care 

Ultimately, authorized users aren’t a threat to your credit unless they misuse your credit card account. Many authorized users coexist happily with main account holders for many years. Problematic authorized users, unlike joint account holders, can be easily removed. Regularly check your credit score to ensure their activity isn’t negatively impacting your score.  

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