Do Authorized Users Build Credit? Know the Pros and Cons
Being added to someone else's credit card as an authorized user can allow you to benefit from their payment history and available credit to elevate your credit score.
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Becoming an authorized user on someone else’s credit card account is a strategy for improving credit quickly. It works best if the primary user's card has a long record of on-time payments and a high credit limit and the authorized user doesn't have recent blemishes on their credit report.
What is an authorized user?
An authorized user is someone who is added to a primary cardholder's credit card account. Even though the credit card company will issue a card with the authorized user's name on it, the primary user is legally responsible for paying charges on the account.
Authorized and primary users should agree ahead of time whether the authorized user will be allowed to use the card or simply be listed as an authorized user. The effect on the authorized user's credit is the same either way. If the authorized user is using the card, both parties should also agree on how payments will be made.
Before becoming an authorized user, ask the primary account holder to confirm that their lender reports authorized user activity to the credit bureaus. If the credit account, also called a tradeline, doesn’t appear on your credit reports, it may be because the lender doesn’t report that information. In that case, there would be no credit building opportunity.
How does being an authorized user affect your credit?
The overall effect of becoming an authorized user depends on your existing credit profile when you enter the relationship.
Generally, those who are just starting out with credit, such as young adults or immigrants who have no credit history in the U.S., can benefit. Those who are rebuilding their credit or have a thin file (typically fewer than four or five credit accounts) may also see positive effects.
Pros and cons of authorized users
Pro: Decrease credit utilization to help build credit score
Authorized users can lower their credit utilization, or the percentage of their credit limits in use, by getting access to more available credit. Credit utilization is a major credit scoring factor — only payment history has more influence on credit scores. But how exactly does it work?
Let's say you have a single card with a $1,000 credit limit and your balance owed is $300. You're using 30% of your credit limits. If someone adds you as an authorized user to their lightly used card with a $15,000 limit, your overall utilization could fall dramatically. The result is likely to be good for your credit score.
Pro: Allows authorized users to get credit without a credit check.
To become an authorized user, only basic personal information is needed — things like your name, address, birthdate and Social Security number. This lowers the barrier of entry to credit for authorized users and speeds up the process.
Pro: Can help children establish credit.
Before children are eligible to apply for a credit card on their own, parents may be able to add them as authorized users to help establish their credit at a young age. Then, when they're eligible to apply for their own, they'll have a strong foundation to build upon. Some lenders have age requirement minimums for authorized users and won't report to the credit bureaus unless the user meets that threshold. Call the issuer to check its age requirements.
» LEARN: What to know before adding your child as an authorized user
Pro: Keeps older accounts open for primary cardholders
Primary cardholders can also benefit from the authorized user relationship. Credit scores are calculated using several factors, including credit age, or the average age of all your credit accounts. Instead of closing older accounts that aren’t used much, which could harm scores, primary users can add an authorized user to keep it active.
Con: Primary users are on the hook for the bill
Primary users are legally responsible for paying off the credit card balance, including expenses incurred by an authorized user. If the primary user misses a payment, it could significantly lower your credit score as well as theirs. Missed payments will also appear on your credit reports.
Con: Credit utilization could surge for primary users
The credit scores of primary users can suffer if either party uses too much of the account’s credit limit. Setting the ground rules early is the key to success. For extra protection, primary users can set spending limits for authorized users on some credit cards.
Con: Lenders would rather see you manage your own credit
Lenders checking your credit history want to see that you've managed your own credit accounts responsibly. Ultimately, being the primary account holder on a credit account will have a bigger impact on your credit score than being an authorized user.
Who benefits from becoming an authorized user?
If you're just starting out and have a thin credit file, becoming an authorized user is likely to benefit you more in terms of payment history than it would if you've been using credit longer and have setbacks to overcome. But lowering credit utilization can have a significant impact for newbies or rebuilders.
If you cannot qualify for a credit card on your own, being an authorized user can help you beef up your credit history and help with credit age, or how long you've been using credit.
If you don't yet have a FICO score, the most commonly used scoring model, becoming an authorized user can shorten the time needed to generate one to less than six months. This status may also let you enjoy the convenience of having plastic in your wallet.
How long should you stay an authorized user?
The length of time someone remains an authorized user depends on the agreement between them and the primary cardholder.
However, authorized users should be prepared for the relationship to end at any time. They should also take steps to protect their credit score when it does. That’s because once the account is removed from their credit reports, the positive impact of the primary cardholder’s credit utilization, payment history and credit age may also disappear.
If you’re an authorized user on someone’s account in an effort to build your own credit, align on expectations and timelines early. For example, the primary cardholder might set a credit score goal for you as the authorized user and, once it's reached, the agreement ends. Or, the agreement could last a set period — like a year or more — to allow time for meaningful credit score growth.
In these situations, keep the purpose of the authorized user status front and center. It’s a temporary credit-building boost. As your score increases, use it as a springboard to open up your own credit card, sign up for a rent-reporting service, or apply for a credit-builder loan to diversify your credit history.
With each independent step, authorized users looking to build credit should incorporate good credit habits, such as paying bills on time each month and keeping credit utilization — the amount of available credit you’re using at a given time — at 30% or less.