Do authorized users build credit?
If you’re trying to build credit, one potential strategy is to become an authorized user on a trusted cardholder’s account. Once you’re attached to the account, you typically get your own credit card that’s linked to the account. And if the account appears on your credit reports, then responsible use of the card can help you build credit.
But there are some things to keep in mind, so read on to find out more.
What you’ll learn:
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Authorized users may be able to build credit. It depends on whether the card issuer reports the authorized user’s information to the credit bureaus and whether the account is used responsibly.
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Using the account responsibly can positively impact both the authorized user’s and the primary account holder’s credit.
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Things like missed payments and high account balances can harm the credit scores of both cardholders.
What is an authorized user?
A credit card authorized user is a person who is given permission by the primary cardholder to use the account. The authorized user might get their own card, but the primary cardholder is still fully responsible for the account. This setup lets trusted family or friends make purchases, manage money and—if good credit habits are practiced—start building their credit history.
How being an authorized user builds credit
Being an authorized user may help you build credit. It first depends on whether the card issuer reports the authorized user’s information to the credit bureaus.
Credit-scoring companies calculate scores based only on information that’s currently on your credit reports. So the card account must appear on your reports in order for a credit card to affect your credit scores. If the account doesn’t appear on your credit reports, it won’t impact your credit history at all.
But if the issuer does report authorized user activity to the credit bureaus, then the impact on your credit depends on how you use the card—as well as the behavior of the main cardholder.
For the account to improve your credit, on-time payments must be made consistently. You’ll also need to keep your credit utilization under control. Credit utilization shows how much of your available credit limit you’re using. A low balance relative to your credit limit may help your credit scores.
Can being an authorized user hurt your credit scores?
In some cases, being an authorized user may potentially hurt your credit scores. For example, late payments and a high credit card balance can lower your credit score. But communication between the authorized user and the primary account holder may prevent this from happening. The primary account holder is responsible for making payments, so you can ask them how they plan to pay on time. For instance, they may set up monthly reminders or automatic payments.
Spending guidelines can help keep your credit utilization under control. Some experts suggest using no more than 30% of the card’s credit limit, according to the Consumer Financial Protection Bureau (CFPB). You and the primary cardholder can talk about budgeting and how much each person may spend each month.
Who can be an authorized user?
An authorized user is typically a trusted family member or friend. Keep in mind that every credit card issuer has different rules about minimum age requirements.
Other ways to build credit
Joining another person’s card account isn’t the only way to build good credit. Here are some alternatives to becoming an authorized user:
Pay down outstanding debts
Some of your credit score is based on credit utilization, which compares your available credit to the amount you’re using. A lower credit utilization is typically good for your credit because it signals you’re less likely to fall behind on payments. Paying off debt can help lower your utilization—and help you build credit.
Make payments consistently and on time
Your payment history is an important factor when it comes to credit scores. Making on-time payments every billing cycle shows lenders you’re likely to continue the trend. Focus on paying your bills on time to help boost your credit.
Open a secured credit card
A secured credit card is a type of card that requires you to pay a security deposit up front. The deposit acts as your collateral. You can build credit by keeping the account open, making on-time payments to the account and keeping your balance low.
Authorized users and credit building FAQ
Research shows that people who are authorized users typically have a credit score of 680 or above. But the effect on an authorized user’s credit scores depends on several factors. Responsible use can generally help your credit scores improve over time. Your scores may go up if the primary account holder always makes payments on time. Low credit utilization can also benefit both cardholders’ credit scores. But your scores may drop if the primary account holder doesn’t make on-time payments or you both collectively use too much of the credit limit.
Key takeaways: Building credit as an authorized user
It’s possible to build credit as an authorized user on someone’s credit card account. But you’ll need to make sure the primary account holder pays the bill on time each month. Late or missed payments could hurt your credit scores. It’s also important to monitor your credit card usage—especially when more than one person is using the account. Using 30% or more of the card’s credit limit may negatively affect your credit.
In addition to becoming an authorized user, it may be worth looking into credit card options of your own that are specifically geared toward credit building. Check out Capital One’s credit cards for fair credit and see which ones might best serve your needs.
