Becoming an Authorized User to Build Credit: Everything You Need to Know

Building credit is an important aspect of managing your personal finances, and becoming an authorized user on someone else's credit card account can be a useful strategy to establish a credit history. By becoming an authorized user, you can benefit from the primary account holder's credit activity and improve your own credit score in the process. 

However, it's important to understand the potential risks and responsibilities that come with this arrangement. In this article, we'll cover everything you need to know about becoming an authorized user to build credit, including the benefits and drawbacks, how to become one, and tips for managing your credit as an authorized user.

Highlights/ Key Takeaways

• An authorized user can use someone else's credit card account with permission from the primary cardholder.
• Being added as an authorized user to a credit card account can help build credit, but it's important to use the card responsibly and make timely payments.
• Becoming an authorized user can benefit those with no credit history, a limited credit history, or a poor credit score.
• Building credit as an authorized user takes time, and it's important to maintain other responsible credit habits over time to see lasting improvements in your credit score.

What is an Authorized User on a Credit Card?

When someone adds you as an authorized user to their credit card account, it means that you’re granted permission to use their credit card and account information to make purchases. As an authorized user, you’re not the primary account holder and are not responsible for making payments on the account.

Instead, you’re allowed to make purchases using the primary cardholder's credit limit, and the primary account holder is responsible for paying the credit card bills. Although, you should be prepared to pay back the primary cardholder for any payments you make. 

Here are some key points to keep in mind about authorized user status:

• Authorized user status is a way for someone to share their credit card account with another person, such as a spouse, child, family member, or trusted friend.
• Authorized users are not responsible for making payments on the credit card account, but they can use the account to make purchases.
• The primary account holder is responsible for making payments on the credit card account, and any missed payments or high balances can negatively impact both the primary account holder's and the authorized user's credit scores.
• Being an authorized user can help build a credit history for someone who has limited or no credit history, as the credit activity on the account is reported to the credit bureaus under the authorized user's name.
• Authorized user status can be removed at any time by the primary account holder, and the authorized user will no longer have access to the credit card account.

How Do Authorized Users Build Credit?

Authorized users can build credit by using a credit card that is not in their name. But, does an authorized user get a credit card for themselves? Yup, they do!

When an authorized user makes purchases on a credit card, the primary cardholder is responsible for making the payments. However, both the primary cardholder and the authorized user's payment history will be reported to the credit bureaus. 

So, if the primary cardholder makes on-time payments and keeps their credit utilization low, the authorized user's credit score will also improve.

There are a few very important things to keep in mind if you are thinking about becoming an authorized user:

• Make sure that you trust the primary cardholder. If they miss payments or rack up debt, it will reflect poorly on your credit score.
• Choose a credit card with a good credit limit. This will give you more flexibility to make purchases and keep your credit utilization low.
• Use the credit card responsibly. Make sure to pay your bills on time and keep your credit utilization below 30%.

Who Benefits from Becoming an Authorized User?

Becoming an authorized user can be beneficial for several groups of people, including:

• Individuals with limited credit history. For someone who has limited or no credit history, becoming an authorized user on someone else's credit card account can be a useful way to establish a credit history. By using the account responsibly and making payments on time, the authorized user can build a positive credit history that can help them qualify for loans, credit cards, and other financial products in the future.
• Individuals with poor credit. If someone has poor credit or a low credit score, becoming an authorized user can also help them improve their credit score. 
• Young adults. Parents or guardians can add their children as authorized users on their credit card accounts to help them establish credit history and teach them responsible credit use. This can be a helpful way for young adults to learn about credit without having to open their own credit card accounts.
• Spouses or partners. Couples who share finances may choose to add each other as authorized users on their credit card accounts to help build credit history together. This can be beneficial for couples who plan to apply for joint loans or credit products in the future.

How Much Will My Credit Score Go Up if I Become an Authorized User?

The impact of becoming an authorized user on your credit score can vary depending on several factors, including the credit card issuer's policies, the primary account holder's credit utilization and payment history, and the authorized user's credit history.

In general, becoming an authorized user on a credit card account with a good payment history and low balances can have a positive impact on your credit score. However, the actual amount of increase will depend on several factors such as the length of time you are listed as an authorized user, the amount of credit card debt on the account, and how timely the payments are made.

If the primary account holder has a high credit utilization rate or has missed payments on the account, becoming an authorized user may not have as much of a positive impact on your credit score or could potentially have a negative impact. This is why becoming an authorized user should not be solely relied upon as a way to improve your credit score. Other factors such as paying bills on time, keeping credit card balances low, and having a diverse credit mix are also important for maintaining a good credit score.

Can Becoming an Authorized User Hurt My Credit? 

While becoming an authorized user on someone else's credit card account can have several benefits, it can also potentially hurt your credit if the primary account holder does not use the account responsibly. Here are a few scenarios where becoming an authorized user could negatively impact your credit:

• Late payments. If the primary account holder misses a payment on the credit card account, this could negatively impact your score as well. Late payments can stay on your credit report for up to seven years and can lower your credit score significantly.
• High balances. If the primary account holder carries a high balance on the credit card account, this could also negatively impact your credit utilization ratio, which is a key factor in determining your credit score.
• Default. If the primary account holder defaults on the credit card account, this can have a significant negative impact on your credit score as well. Defaulting on a credit card account can result in collection efforts and legal action. 

It's important to note that while becoming an authorized user can potentially hurt your credit, you are not legally responsible for any debt incurred on the credit card account. The primary account holder is responsible for making payments on the account, and if they fail to do so, the creditor will typically pursue the primary account holder for payment.

What Are the Pros and Cons of Authorized Users?

Becoming an authorized user is a simple, often rewarding process. That said, there are definitely negatives you should consider as well. 

Pros of Authorized Users

• Easily build credit history. Authorized user status is a great way to establish or improve credit history, especially for someone who has limited or no credit history. 
• Access to credit. Being an authorized user gives someone access to credit that they may not otherwise have been able to obtain on their own, which can be helpful in emergency situations or when making large purchases.
• No responsibility for payments. As an authorized user, you’re technically not responsible for making payments on the credit card account, the primary account holder is. Of course, you should take care to make an arrangement with the primary account holder so you’re not racking up credit card debt on their behalf. 

Cons of Authorized Users

• Impact on credit score. Although becoming an authorized user can help improve your credit history, it can also negatively impact credit scores if the primary account holder misses payments or carries a high balance on the credit card account.
• Limited control over the card. As an authorized user, you have limited control over the credit card account. You cannot make changes to the account, such as changing the credit limit or adding or removing authorized users, without the permission of the primary account holder.
• Potential for misuse. Being an authorized user means having access to someone else's credit card account, which can be a potential risk if the authorized user misuses the account or makes purchases without the primary account holder's knowledge or consent.

What Are the Qualifications to Become an Authorized User?

There are no specific qualifications to become an authorized user. However, the primary cardholder may have their own requirements, such as:

• Being a family member or close friend. While there are third-party companies that help you get on a reputable stranger’s account, most primary account holders won’t accept anyone other than family or friends as authorized users on their accounts.
• Being of legal age. Certain card companies require that the authorized user be 18, or at least a child of the user if they’re underage.
• Agreeing to make payments on time and in full. Primary account holders will likely want to be paid back for any purchases you make.

Should I Become an Authorized User to Build Credit? 

Whether or not you should become an authorized user to build credit depends on your individual circumstances. Here are some things to consider:

• Your credit score. If you have poor or fair credit, becoming an authorized user can help you start building your credit history. Good credit borrowers, on the other hand, will want to look at other products to inch their score up to excellent credit. 
• The primary cardholder's credit score. If the primary cardholder has good credit, their payment history will be reported to the credit bureaus, which will help you build your credit score.
• The primary cardholder's spending habits. If the primary cardholder makes on-time payments and keeps their credit utilization low, their good credit habits will rub off on you and help you build your credit score.
• The terms of the agreement. Make sure you understand the terms of the agreement before you become an authorized user. For example, who will be responsible for making payments and how will you be reimbursed for your purchases?

How to Build Credit as an Authorized User

Becoming an authorized user on someone else's credit card account can be a great way to build your credit, but it's important to do it responsibly. 

Find a Willing Friend or Relative with a Credit Card

The first step in becoming an authorized user is to find someone who is willing to add you to their credit card account. This could be a friend, family member, or even a spouse. It's important to choose someone who has a good credit history and who is responsible with their credit card use.

Make Sure Their Credit Card Allows Authorized Users

Before you can become an authorized user, you'll need to make sure that the credit card company allows it. Some credit card companies won’t, while others charge a fee for adding an authorized user to the account. Still, some let you add users for free. 

Provide Your Information to the Credit Card Company

Once you've found someone with a credit card that allows authorized users, you'll need to provide your information to the credit card company. This typically involves providing your name, date of birth, and social security number.

Discuss a Payment Plan with the Primary Cardholder

Before becoming an authorized user, discuss a payment plan with the primary cardholder. You'll want to make sure that you both agree on how the card will be used and who will be responsible for making payments on the account.

Use the Card Responsibly

Once you've been added as an authorized user, it's important to use the card responsibly. This means using the card for small purchases and paying off the balance in full each month. It's also important to monitor the account regularly to ensure that payments are being made on time and that the credit utilization ratio is kept low.

Alternative Ways to Build Credit without Becoming an Authorized User

Becoming an authorized user to build credit is one of the easier methods of upping your score relatively quickly, but it involves knowing someone willing to work with you. If you’re on your own or don’t otherwise qualify to become an authorized user, here are a few alternatives.  

Apply for a Secured Credit Card

A secured credit card is a type of credit card that requires you to deposit a security deposit with the issuer. The amount of the deposit is usually equal to your credit limit. For example, if you deposit $200 with a secured credit card company, you’ll have a credit limit of $200.

After you have used your secured credit card responsibly for a few months, you may be able to upgrade to an unsecured credit card. Unsecured credit cards don’t require a security deposit and often come with rewards. 

Take Out a Credit-Builder Loan

A credit-builder loan is a type of loan that is designed to help you improve your credit score. With a credit-builder loan, you borrow a small amount of money and repay it over a period of time. The loan is reported to the credit bureaus, which helps you build your credit history.

Credit-builder loans are a good option if you have no credit history or if your credit score is poor. However, credit-builder loans can be expensive. The interest rates on credit-builder loans are usually higher than the interest rates on other types of loans.

Open a Line of Credit at a Retail Store

Another option for building credit is to open a line of credit at a retail store. Many retailers offer credit cards that can be used only at their stores, and these cards can be an excellent way to build credit if used responsibly. I’m a huge fan of the Target RedCard, which offers 5% back at physical and online Target stores. 

Other Ways to Build Credit

There are other ways to build credit without having to use a credit product. This includes:

• Making your rent and utility payments on time.
• Paying your bills on time.
• Keeping your credit utilization low.
• Applying for new credit in moderation.

Final Word

Becoming an authorized user on someone else's credit card account can be a great way to build your credit, but it's important to approach it with caution and responsibility. Remember, being added as an authorized user to a credit card account is not a guarantee that your credit score will improve. Your credit utilization ratio, payment history, and other factors still play a significant role in determining your credit score.