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Last Updated on December 16, 2022 by David
The simple answer is yes, being added as an authorized user can help your credit score in numerous ways. While it can be beneficial to the authorized user when planned and used properly, it can have a negative impact on the primary cardholder if the authorized user is irresponsible. It’s also a good idea to have a talk or agreement between the primary cardholder and the authorized user on what type of responsibilities the authorized user will have. Will you have access to a physical credit card or are you just being added to help build credit? Having this discussion will minimize any confusion that may occur later on.
What is an authorized user on a credit card?
An authorized user is someone that is added to the account of the primary cardholder. In short, this means there will be two cards issued for one account. One card would be for the primary cardholder and the other would be for the authorized user. The account balance stays the same and is shared between the two users, but the primary user is the one responsible for making sure it is paid back.
What are the benefits of becoming an authorized user?
The main benefit of becoming an authorized user is to increase your credit score. The main goal is to lower your credit utilization which will greatly affect your credit in a positive way. For example, let’s say you have a credit card with a limit of $1000 and owe $500, that would mean you have a credit utilization of 50% which is high if you’re trying to improve your credit. If you were added as an authorized user and the primary user has a limit of $10000, that limit would also become your limit. In the end, you would have a limit of $11000 total and owe $500 which would drop your utilization to 0.045%.
Is there a credit pull when adding an authorized user?
There is no credit pull when being added as an authorized user as you will be under the primary account holder.
Pros and Cons of becoming an authorized user
Pros
- Easy way to build credit
- Lower credit utilization
- More point for primary card holder if authorized user is allowed to use the hard.
Cons
- Risk to the primary card holder
- Risk to the authorized user if the primary card holder misses a payment.
- Primary card holder is responsible for all the spending on the account
- Can increase tensions in a relationship.
Food for thought
Remember that adding or being added as an authorized user could have a lot of benefits, but also carries a lot of risks. It becomes a two-way street and the actions of one party will affect the other.
