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Authorized User Status Helps Credit Score, But Not a Lot

Credit Cards, Credit Score, Personal Finance
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Will becoming an authorized user help me improve my credit?

Building credit is a long road, and there are very few shortcuts. Becoming an authorized user on someone else’s credit card account is a common strategy for improving credit quickly. While that approach might help a bit, it’s no substitute for diligently building credit over time.

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If you want to give authorized user status a try, understand the pros and cons of taking that route.

What being an authorized user means

If you become an authorized user on someone else’s credit card, you’ll likely be issued a card with your name on it that you can use to make purchases.

As an authorized user, you’re not legally obligated to pay the debts that might accumulate on the account. That responsibility lies with the primary account holder.

How your credit report is affected

Because you’re not technically responsible for paying the bills, being an authorized user doesn’t have a huge impact on your credit scores. But if you little or no credit history, being an authorized user does give you some experience using credit. That’s worth something, even if it might help your credit only slightly. Note that it helps if the primary account holder has had the account open for a long time and has a clean payment history.

Why won’t it dramatically build your score? For one thing, some credit card companies don’t report authorized users to the credit bureaus. If your authorized user status isn’t on your credit reports, it won’t help your score. Ask the primary account holder’s credit card issuer if it reports authorized users.

Historically, authorized users were treated similarly to primary account holders by FICO, the company that provides the most widely used credit scores in the U.S. But over time, FICO changed its scoring system so authorized user status now has a smaller impact on a consumer’s overall score.

Even if your score goes up slightly, authorized user status alone might not increase your chances of getting approved for credit cards and other types of loans in the future. Lenders looking at your credit history might not be impressed if being an authorized user is your only track record. They want to see that you’ve responsibly managed your own credit accounts.

There is value to being an authorized user, though. If you can’t qualify for a credit card on your own, you can still enjoy the convenience of having plastic in your wallet. But if you’re doing it just for the credit boost, you’re probably better off using another method.

How to really build your credit

So what can you do that will push your score up significantly? Unfortunately, there’s no quick fix for someone with bad credit or no credit — but there are some tried-and-true strategies.

  • Pay your bills on time. Your payment history accounts for the biggest chunk of your credit score, so don’t pay late — ever.
  • Keep your balances low. Your credit utilization ratio, or the amount you owe compared with your total available credit, factors into your credit score. Keep your debts as low as possible and use no more than 30% of your credit limit for each card.
  • Take the long view. The length of your credit history is also important. Keep old accounts open, even if you don’t use them often, as long as you don’t have to pay an annual fee. Avoid opening lots of new cards in quick succession.

These aren’t the only things that affect your credit score, but they’re the most heavily weighted. If you get these three things right, you will almost certainly build your credit.

While you’re working on your score, consider applying for a secured credit card. Since you have low or no credit, you’ll have to pay a deposit upfront if you’re approved. Secured cards allow you to prove that you can be trusted with a credit card and spare you from relying on someone else to make you an authorized user on their account.

Being the primary account holder on a secured credit card will have a much bigger impact on your credit score. As long as you pay on time and keep your balance low, it’ll go along way toward making you financially self-sufficient.

This article was updated Nov. 4, 2016. 

Virginia C. McGuire is a staff writer covering personal finance for NerdWallet. Follow her on Twitter @vcmcguire and on Google+.