Getting started building credit can be difficult, especially for young adults just entering the workforce or newly arrived immigrants. One strategy some people consider is getting added as an authorized user on someone else’s credit card account to help build their credit history. But does being added as an authorized user actually help your credit score? Let’s take a closer look.
How authorized users work
An authorized user is someone who has permission to make charges on a credit card account but is not financially responsible for repaying the debt. The primary cardholder retains all liability. Authorized users essentially “piggyback” off the primary user’s credit history.
When you add someone as an authorized user on your credit card, their name is added to the account. Any positive or negative payment history on the card will then start being reported on the authorized user’s credit report as well. This can help build their credit if you have a long history of on-time payments. However, any late payments will also negatively impact their score.
Requirements for credit reporting
For an authorized user to receive the credit building benefits, the primary account holder must report their name and information to the credit bureaus. The three major credit bureaus – Experian, TransUnion and Equifax – will then record the authorized user status on both credit reports.
However, it’s important to note that not all credit card issuers report authorized user information. According to Experian, approximately 40% of credit cards routinely report authorized user data. So you’ll want to check with your card issuer first before adding an authorized user if the goal is to build their credit.
How authorized user status impacts credit scores
Being added as an authorized user can provide a decent credit score boost by allowing you to “inherit” the primary cardholder’s positive history. For example, if the primary user has had the credit card for 15 years with perfect on-time payments, those positive details will start to factor into the authorized user’s credit score calculation as well.
For someone with little or no prior credit history, this can improve their creditworthiness significantly in the eyes of lenders. Even a short authorized user history of 6 months to a year is valuable for credit building compared to no history. The longer the history, the bigger the potential boost.
However, the exact credit score impact will depend on the authorized user’s current credit situation as well as the primary cardholder’s history. Those with poor credit have the most to gain. But for those with medium to good credit, the gains may be minimal. And a short or troubled history on the card could even cause a slight decrease in scores.
Approximate credit score increases
| Current Credit Profile | Expected Score Increase |
|---|---|
| Poor credit (below 630) | 40-100+ points |
| Fair credit (630-689) | 20-50 points |
| Good credit (690-719) | 10-30 points |
| Excellent credit (720+) | Minimal or no increase |
When authorized user status may not help
There are a few scenarios where being added as an authorized user is unlikely to improve your credit:
- The primary account holder has poor credit or a history of late payments. Their negative status gets passed on.
- The credit card does not report authorized user activity to credit bureaus.
- The primary cardholder does not provide your Social Security number. This is needed for credit bureaus to match the history to your report.
- The account is relatively new. More aged accounts have greater impact.
- You already have good credit. Authorized user status benefits those with limited histories the most.
How to get the maximum boost
Follow these tips to maximize the credit benefits of being added as an authorized user:
- Partner with someone with excellent credit – Choose a primary account holder that has a long credit history, low balances, and no late payments. This provides the most benefit.
- Make sure account activity gets reported – Confirm the primary cardholder’s issuer reports authorized user status before getting added.
- Get added to aged, active accounts – Older accounts with some consistent monthly spending will optimize impact.
- Have your SSN attached – This allows credit bureaus to add the history across your credit report accurately.
Alternatives to build credit
If you are not able to find a primary account holder that reports authorized user status, there are a few other options to build credit:
- Apply for a secured credit card – These require a refundable security deposit and are easier to qualify for.
- Become an account joint owner – Joint accounts consider all owners equally liable for repayment.
- Take out a credit building loan – These loans are structured to help establish positive payment history.
- Open a new student credit card – Student cards are intended for those with little or no credit history.
Is it worth paying to add someone as an authorized user?
Some credit repair companies offer services to add clients as authorized users to accounts with excellent payment histories in exchange for a fee. However, this is rarely worthwhile given other easier and cheaper ways to improve credit scores.
For example, becoming an authorized user on a trusted friend or family member’s account for free provides the same benefit. And other options like secured cards guarantee credit building at lower cost.
Paying a company does not provide any additional reporting benefit compared to organic authorized user relationships. Make sure you explore all self-service credit building alternatives before considering any paid services.
Risks and downsides of authorized user status
While being added as an authorized user can provide a valuable credit boost, there are also some potential downsides to consider:
- All negative activity on the card also impacts your credit. Any missed or late payments from the primary user show up on your history.
- You have no control over the account. The primary cardholder’s actions determine if your credit may get damaged.
- Improvement takes time. You likely need at least 6 months of positive history reporting to see a meaningful increase in scores.
- Not all lenders consider authorized user history. Some may disregard the status when making lending decisions.
Weigh these risks carefully before getting added. Make sure you completely trust the primary cardholder to be responsible with payments and balances.
When does authorized user history drop off?
Your credit report will continue showing the authorized user history for as long as the account remains open and positive. If you get removed from the card, the history will stay on your credit report for ten years from the date you were taken off the account.
For example, if you are removed as an authorized user today from a card opened in 2010, the history would disappear from your report around 2033. This gradual drop off means your credit score benefits do not disappear overnight if removed.
Getting removed as an authorized user
A primary account holder can remove an authorized user at any time either online or by calling the card issuer. This immediately stops the authorized user’s access and ability to make charges. Removing an authorized user also prevents any further credit impact – positive or negative.
In addition, credit card companies are required to accept requests from authorized users to be taken off accounts. So you can also initiate removal if the primary holder is unwilling or unable to do so.
However, keep in mind that the positive history and credit score boost will remain for up to 10 years. So removal may not be necessary unless the primary user demonstrates reckless usage and missed payments.
Pros of being an authorized user
- Fast way to build credit – Starts benefiting score in as little as a month or two
- No credit check needed – Getting added is easy since you’re not liable for the debt
- Low risk and commitment – Can be removed as an authorized user at any time
- Free way to piggyback good history – Takes advantage of primary user’s positive status
- Helps those with no credit or poor credit the most – Biggest gains for those currently with low scores
Cons of being an authorized user
- Vulnerable to primary user’s mistakes – Late and missed payments hurt your credit too
- Not guaranteed to report to bureaus – Check issuer reports authorized user data first
- May provide minimal benefit for those starting with good credit
- No guaranteed impact on loan approval odds – Some lenders disregard authorized user history
- Longevity depends on primary user – Access can be revoked at any time
Is being an authorized user right for you?
Becoming an authorized user can provide a nice credit score boost quickly if you partner with the right primary account holder. But proceed with caution – make sure you completely trust the person you are getting added by before moving forward.
Also recognize it is just one option for building credit – the other alternatives mentioned may be smarter starting points depending on your situation. Weigh the pros and cons carefully to decide if authorized user status aligns with your credit building needs and goals.
Conclusion
Being added as an authorized user can help your credit score by allowing you to benefit from the primary cardholder’s positive history. But there are quite a few requirements that must be met to receive this benefit. The primary account holder needs to report your status to credit bureaus, provide your SSN for matching, and have an excellent payment record.
While authorized user status provides the most value for those with limited credit histories, it does come with some downsides. Make sure to assess your options carefully and maintain a relationship with a responsible primary cardholder. With the right approach, being an authorized user can provide a nice credit boost while helping you build positive history.