Building up good credit can be a daunting task, especially if unfortunate circumstances have brought your credit score down. But luckily there are a variety of things you can do to push your credit back into the green. One of them is becoming an authorized user on someone else’s credit card, which, under the right circumstances, will allow you to borrow a little bit of someone else’s positive credit history while you work to build up your own.
How becoming an authorized user works
Unlike getting your own credit card, becoming an authorized user does not require a credit check. This means that anyone, from kids to spouses to friends, can become an authorized user on an account, assuming the card issuer allows this. (Some credit cards limit the authorized users allowed per account, so it’s best to check in advance.)
Once a friend or family member adds you as an authorized user on their account, you will receive a card in your own name that is connected to their line of credit. This gives you access to the spending power of the card, and your expenditures count toward the limit along with those of the primary cardholder.
“The person helping you out by adding you as an authorized user can have the additional card sent to them, so you don’t have to even receive the card,” said Michael Bovee, a debt relief expert with more than 20 years of experience, and the co-founder of Resolve.
More importantly, though, this newfound line of credit could help you build a positive credit history. Most major card issuers report authorized users to credit bureaus, meaning the account you’ve been added to will be factored into your credit report. (A quick call to the card’s customer service line can verify that they report authorized users.) Assuming the account has good history, it should give a boost to your credit because the full, positive credit history will appear on your report.
What to look for when becoming an authorized user
There are certain characteristics you should look for in the person whose account you want to sign on to as an authorized user. First, make sure the primary cardholder is diligent in making payments on time. Even one late payment could do a lot of damage to your (and their) credit score. Second, the account should maintain a low credit utilization, or the ratio of unpaid debits on the card compared to its credit limit. According to Experian, that ratio should stay below 30%.
The most valuable accounts are those that have a long, positive history, so look for credit lines that have been open for a while.
More than anything, you should trust the person whose account you’re joining. If you believe they’ll be honest with you about their financial habits and will continue making timely payments, they might be a good candidate. You could also ask them to share their credit score with you or update you when monthly payments are made.
Will this really help build my credit?
As long as the card issuer reports authorized users and the account you’ve been added to has a positive history, it should boost your credit. But the size of the boost can vary.
Different credit bureaus and score calculators give varying weight to authorized user status, so don’t be surprised if your credit score is different depending on which of the credit bureaus is doing the reporting.
In addition, since the economic downturn in 2008, FICO, a leading scoring algorithm, has put measures in place to minimize benefits from tradeline renting, or the practice of paying a stranger to become an authorized user on their card to boost credit. Honest authorized users shouldn’t have to worry, but to avoid confusion, your safest bet for a credit boost may be adding your name to the account of a close relative, such as a spouse, parent, grandparent or sibling.
Becoming an authorized user is likely most beneficial for people who don’t have much credit history. Being an authorized user may make it easier to be approved for your own credit card, which will have a much bigger impact on your credit score.
How will it affect the primary user?
As an authorized user, you don’t need to spend anything to reap the benefits of the account’s positive history, meaning your authorized status could have almost no effect on the primary cardholder. But if you do use the card, make sure you use it responsibly because the primary card holder is legally responsible for all the charges.
Primary cardholders can add or remove authorized users at any time, and some issuers, like Capital One, also let the primary cardholder freeze the spending ability of an authorized user temporarily. If the primary user has a rewards card, they will earn rewards from the authorized user’s spending.
Becoming an authorized user shouldn’t be your only strategy for building credit. Instead, it should be a stepping stone toward opening your own lines of credit. Handling your own accounts responsibly will always reap larger benefits than tagging along with someone else.
If you can’t get approved for a regular credit card, consider opening a secured card and building up positive credit history that way first.