Does being an authorized user on a credit card help your credit score?

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Many people wonder how authorizing another person (usually a friend or relative) on their credit card will affect both parties’ credit scores. Back in the day, becoming an authorized user on someone else’s credit card was a great way to boost your credit. While being an authorized user is a great tool for building credit, some things have changed in recent years. This article explains in detail how you should use this credit building tool to your advantage.

What does it mean to be an authorized user?

When you become an authorized user on someone else’s credit card account, you receive a credit card in your name. You can use this credit card in the same way as the main user. However, you are not legally obligated to pay the debt. The main user is responsible for paying the debt on the credit card. It also means that if you are an authorized user and use the credit card irresponsibly, the primary user is responsible. There will be more details on this later. Typically, a person becomes an authorized user on another person’s credit card rather than just getting a credit card in their own name because the person has poor credit and would not get approved. .

Be an authorized user to help build credit

Many years ago it was common to become an authorized user to rebuild your credit. However, the algorithm that generates your FICO score no longer factors it into the equation. In other words, it’s still a good tool for building your credit if you have no credit history, but it won’t help you rebuild your score if you have bad credit due to negative entries.

The best way to improve your credit score if you have bad credit is to get a secured credit card and remove negative entries from your credit report. You should also note that being an authorized user won’t have a huge impact on your credit score if you don’t have a credit history, but it will help, so why not take advantage of it?

Again, becoming an authorized user is a tool for establishing good credit rather than rebuilding bad credit. There’s a big difference, and many people make the mistake of thinking they’ll improve their bad credit by becoming an authorized user on their spouse’s credit card. It just won’t affect your bad credit.

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Create a joint account instead

Although creditors may take a closer look at a credit score when opening a joint account, setting up one of these accounts can be a safe bet. Additionally, both people will see positive credit score gains. And since this is a joint account, both people are responsible for payment and both names are on the account.

Adding an authorized user is risky

Finally, those considering letting another person become an authorized user on their credit card should exercise great caution. There are countless cases where a family member has become an authorized user, the family member has increased the credit card bill and now the account owner is responsible for a bill they cannot pay . You need to realize that there is a real possibility of this happening to you. This does not mean that your family member will intentionally harm you financially, but this type of situation happens all the time, and you should keep in mind the risk you are taking by allowing someone to use credit in your name.

That said, if you really want to help a young family member, perhaps your college-going son or daughter, letting them become an authorized user on your credit card is a tool that will help them establish a positive credit history.