Does Adding an Authorized User Affect Credit Score?
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ExpertiseHarrison Pierce is a writer and a digital nomad, specializing in personal finance with a focus on credit cards. He is a graduate of the University of North Carolina at Chapel Hill with a major in sociology and is currently traveling the world.
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When it comes to credit scores, many are unaware of how small details can impact the overall result. Adding an authorized user to your account may appear beneficial in growing your credit score. However, this approach can be more detrimental than intended in certain circumstances.
Before permanently linking an individual account to yours, it is essential to consider both risks and rewards associated with this action and ensure that the long-term benefits outweigh the short-term relief of a slightly increased score. Being aware of the consequences of adding an authorized user is important for maintaining a positive credit score and overall healthy financial management.
In this article, you’ll learn:
What is an authorized user?
An authorized user is a person who is authorized to use a credit card account by the primary account holder. The authorized user is not responsible for paying the bills, but their use of the card can affect the primary account holder’s credit score and history.
Authorized user vs joint account
An authorized user is added to an existing credit card account and is allowed to use the card but is not legally responsible for paying the bills. The credit history of an authorized user can affect their credit score, but they do not have ownership rights to the account.
On the other hand, a joint account is a credit card account owned and managed by two or more individuals. Each owner is equally responsible for paying the bills and has ownership rights to the account. Joint account holders have equal access to the credit limit, and the account activity affects the credit history of both account holders.
Pros and cons of authorized users
Pros of adding authorized users to your account:
- Building credit: By adding an authorized user to your account, you can help them build or establish their credit history.
- Convenience: Authorized users can use your credit card for their purchases, which can be helpful in an emergency or when they need to purchase but don’t have their credit card.
- Increased spending power: Adding an authorized user to your account can increase your spending power as you now have access to a larger credit limit.
Cons of adding authorized users to your account:
- Risk of debt: Authorized users can use your credit card and rack up debt, which you will be responsible for paying if they don’t.
- Reduced control: You may have less control over how the authorized user uses your credit card and how they manage their finances.
- Impact on credit score: The authorized user’s behavior, including late payments or overspending, can impact your credit score and history.
- Legal responsibility: As the primary account holder, you are legally responsible for paying any debt incurred on the account, regardless of who made the purchases.
Will adding an authorized user affect your credit?
Yes, adding an authorized user to your credit card account can affect your credit. The authorized user’s activity on the account will appear on your credit report and can impact your credit score and history. If the authorized user makes timely payments, it can positively impact your credit. However, if the authorized user makes late payments, overspends, or runs up a high balance, it can negatively impact your credit. As the primary account holder, you are ultimately responsible for any debt incurred on the account.
Should you add an authorized user to your credit card?
Whether you should add an authorized user to your credit card depends on your specific situation and financial goals. Here are some factors to consider:
- Trust: Can you trust the authorized user to use your credit card responsibly and pay any debts incurred on the account?
- Credit history: Is the authorized user trying to build or establish their credit history? If so, adding them as an authorized user could be a way to help them achieve this goal.
- Financial responsibility: Are you comfortable with the risk of taking on more debt if the authorized user overspends or fails to pay the bills on time?
- Impact on credit score: Are you willing to risk your credit score and history being impacted by the authorized user’s behavior?
- Alternatives: Are there alternative ways to help the authorized user build their credit or access credit if needed, such as applying for a secured credit card or becoming a co-signer on a loan?
It is essential to consider these factors carefully before adding an authorized user to your credit card. If you add an authorized user, it is also important to communicate clearly with them about their responsibilities and your expectations for how the credit card will be used.
Will being an authorized user affect your credit?
Yes, being an authorized user on a credit card account can affect your credit. The activity on the account, including payment history and balances, will appear on your credit report and can impact your credit score and history. If the primary account holder has a good payment history and low balances, being an authorized user can positively impact your credit. However, if the primary account holder has late payments, high balances, or other negative activity on the account, it can negatively impact your credit. It is important to be aware of this potential impact and choose wisely when considering becoming an authorized user on someone else’s credit card account.
FAQs
Being removed as an authorized user from a credit card account may have a minimal impact on your credit score, but it will depend on the specific circumstances. If the account had a positive payment history and low balances, having it removed from your credit report could result in a slight decrease in your credit score. However, if the account had a negative payment history or high balances, having it removed from your credit report may positively impact your credit score.
It’s important to monitor your credit regularly and address any negative information on your credit report to maintain a good credit score. If you’re concerned about being removed as an authorized user affecting your credit, it’s a good idea to discuss the situation with the primary account holder and consider other ways to build your credit history, such as applying for a secured credit card or becoming an authorized user on another account with a positive payment history.
As the primary account holder, you are legally responsible for paying any debt incurred on the credit card account, regardless of who made the purchases. This includes debt incurred by an authorized user. While the credit card issuer may pursue the authorized user for payment, the primary account holder is ultimately responsible for repaying the debt.
It is essential to be aware of this potential financial liability before adding an authorized user to your account and to consider this when deciding whether to add an authorized user and who to add. It is also important to communicate clearly with authorized users about their responsibilities and your expectations for how the credit card will be used.
Removing an authorized user from a credit card account will not hurt your credit. The authorized user’s activity on the account will be removed from their credit report and will no longer impact their credit score and history. Removing an authorized user from the account will not affect the primary account holder’s credit report or score.
If you’re concerned about the impact of removing an authorized user on your credit, you should talk to the authorized user and consider other ways to build or maintain your credit history, such as paying bills on time, keeping balances low, and avoiding applying for new credit excessively.
It can take anywhere from several days to several weeks for an authorized user to see a change in their credit score after being added or removed from a credit card account. The exact timeline will depend on several factors, including when the credit card issuer reports the account activity to the credit bureaus and how often the authorized user checks their credit score.
Typically, it takes 30 to 45 days for credit card activity to be reported to the credit bureaus and reflected in the authorized user’s credit report. However, this timeline can vary depending on the credit card issuer and the credit bureau.