Does being added as an authorized user help credit?
Being added as an authorized user on a credit card can have several potential benefits for your credit score. Credit scores are crucial in determining your eligibility for loans, mortgages, and even renting an apartment. Therefore, understanding how being an authorized user can impact your credit is essential. Let’s delve into the details and explore whether or not being added as an authorized user can help improve your credit.
Understanding the Role of an Authorized User
An authorized user is someone who is granted access to a credit card account but is not the primary account holder. This person has the ability to make purchases and access the credit line associated with the account. However, the authorized user is not responsible for paying the bill and does not have the legal obligation to repay the debt. The primary account holder is solely responsible for the account’s activities and payments.
Impact on Credit Score
Adding an authorized user to a credit card can potentially help improve your credit score in several ways:
1. Establishing Credit History: If you are a new borrower or have a limited credit history, being added as an authorized user can help establish a positive credit history. The authorized user’s credit activity, including payment history, utilization rate, and account age, will be reflected on your credit report.
2. Account Age: The age of your credit accounts plays a significant role in your credit score. By being an authorized user on an older credit card account, you can benefit from the account’s age, which can positively impact your score.
3. Payment History: If the primary account holder has a history of making timely payments, this positive payment behavior will be reflected on your credit report. This can improve your credit score, especially if you have a limited payment history.
4. Credit Utilization Rate: The authorized user’s credit utilization rate will be included in your credit score calculation. If the primary account holder maintains a low credit utilization rate, it can positively influence your score.
Considerations and Risks
While being added as an authorized user can help improve your credit score, there are a few considerations and risks to keep in mind:
1. Account Activity: If the primary account holder has a poor payment history or high credit utilization, this negative activity can also be reflected on your credit report, potentially harming your score.
2. Credit Report Accuracy: Ensure that the credit reporting agencies accurately reflect the authorized user’s information on your credit report. If there are any discrepancies, you may need to dispute them with the credit bureaus.
3. Joint Liability: Although the authorized user is not responsible for repaying the debt, you may still be held jointly liable for any late payments or charged-off accounts. It is essential to communicate with the primary account holder to ensure responsible credit management.
Conclusion
In conclusion, being added as an authorized user on a credit card can potentially help improve your credit score. However, the impact on your score will depend on the primary account holder’s credit behavior and your own credit history. It is crucial to understand the risks and responsibilities associated with being an authorized user before making a decision. If you are looking to build or improve your credit, becoming an authorized user may be a valuable option to consider.
