When you’re starting to build credit or rebuild credit, every little bit helps. Getting added to someone’s credit card account as an “authorized user” can give your credit score a boost.
Someone’s good credit can be passed onto you without you having to actually apply for the credit card. This is known as “Authorized User” credit.
Authorized user credit is equally effective for both people who need to build their credit history from scratch as well as for people who need to rebuild credit. Most credit card issuers let you add an additional person to your credit card account.
Authorized user credit can speed up the process of improving or building credit scores. Authorized users are legally ‘authorized’ to use the primary cardholder’s account and all information associated with the account is reported on the authorized user’s credit reports.
How authorized user credit works
When you are an authorized user, the account and all of the information associated with it, will show up on your credit report as a tradeline. The best way to benefit from an authorized user account is to have your name added to an established credit card account that has a low balance relative to the credit limit, and has an impeccable payment history. Once you are an authorized user, the account and all of the information associated with it, will show up on your credit report as a tradeline.
What authorized user credit can do for FICO scores?
When the primary cardholder’s account is in good standing (no late payments, older account and low credit utilization) it will immediately be considered by the FICO scoring systems which can help improve the authorized user’s credit score. There is an exception to this if the FICO scoring model believes you’re simply trying to game the system by having your name added to the account. That leads to topic below of “tradeline renting.”
Who can become an authorized user?
Authorized users are typically spouses, children, and other relatives or even employees or people close to the primary cardholder. The most widely used credit scoring model, FICO® Score 8, substantially reduced the benefits of authorized user credit if it appears that a primary cardholder has “rented” their good credit to a stranger. The scoring system recognizes a spouse, child or other family members as opposed to a complete stranger that may live in a different state but yet has been added as an authorized user.
Type of Authorized User Credit known as Tradeline Renting
Tradeline renting is a credit repair practice that adds a credit-challenged consumer as an authorized user to a stranger's good credit account in order to boost low credit scores. Trade-line renting companies have an inventory of credit cards with different ages and credit limits consumers looking to boost credit scores can choose from. Creditworthy consumers willing to add a stranger as an authorized user get a fee for “renting” out their good credit accounts.
Although not as common as it was in previous years, tradeline renting still exists. You can still find companies offering to connect you (for a fee) with consumers willing to add strangers as authorized users to their credit card accounts. Tradeline renting walks a fine line. It can be seen as bank fraud because you are knowingly misrepresenting your credit history.
Authorized users on credit reports
It is important to make sure a creditor reports the authorized user credit to the credit bureaus. Not all credit card issuers report authorized users’ activity to credit bureaus, and those that do might not report it in the same way. If the credit issuer reports authorized user credit, within a few months of becoming an authorized user, the history associated with the account will be added to your credit reports.
Are authorized users responsible for monthly payments
As an authorized user, you are not held liable for the charges or balance on the account. That means you will never be asked to make a payment on the account, even if that payment is late. The responsibility will always remain with the primary cardholder on the account. All correspondence including credit cards, statements and notifications will be sent to the address listed on the primary's account.
Drawbacks of becoming an authorized user
By being added as an authorized user, you’re inheriting the primary accountholder’s credit habits. That means if the primary accountholder makes a late payment; that late payment will show up on your credit reports. But late payments are not the only red flag that can hurt your credit scores. A high balance will also lower your credit score. If the primary cardholder makes heavy use of the credit account; that high credit utilization can lower your FICO score.
“When you are an authorized user, the account and all of the information associated with it, will show up on your credit report.”
Keep track of the primary cardholder’s use of the credit account because you may need to remove yourself as an authorized user. Negative authorized user accounts can be removed from credit reports.
Best results for becoming an authorized user
Authorized user credit can help build your credit but you should follow a few guidelines:
- Have your name added to a credit card account that is at least 12 months old
- The account should have a low balance relative to the credit limit
- There should be no late payments showing on the account
- Set a time limit on when to remove yourself as an authorized user
- Make sure you establish credit accounts, in good standing, in your name only
The authorized user strategy is an easy way to add positive credit accounts to your reports. You could see your credit scores improve considerably, depending on your individual scenario. Just be sure to consider the benefits as well as any possible drawbacks.
If you cannot become an authorized user apply for an unsecured credit that has easy qualifications.