What is an Authorized User on a Credit Card?

Advertising Disclosure

In personal finance one of the most important data points is your credit score. Your credit score determines your ability to take on debt and at what cost via the interest rate. For those that have a credit card you have the ability to add authorized users, which effectively can use the credit card as equally as you. This can be a worthwhile option if you have average credit and need to increase your score, but are unable to obtain lines of credit on your own. We’ll detail a few main points to consider when becoming an authorized user to increase your credit score.

Benefits of Being an Authorized User

Starting with the benefits, being added as an authorized user can positively impact your credit score if the primary user has a strong history of on time payments. Being an authorized user will have this account added to your credit score and be reported should your score be pulled.

Furthermore, a measurement point for credit scores is credit utilization. If the primary person on the account pays their balance off and utilizes a small amount of their line of credit, this can also positively impact your credit score. Keep in mind though as an authorized user, you are not typically responsible for payments or authorized to alter aspects of the account. Simply, you are able to utilize the line of credit for purchases.

Risks of Being an Authorized User

While there are benefits to being an authorized user on a credit card there are risks involved as well. If you are looking to improve your credit score you’ll want to ensure the primary account holder has a sound account. Should the individual be late on payments or use higher amounts of their credit line it can negatively impact your credit score.

As previously mentioned, you are not responsible for payments but even so you are exposed to the risks should the account fall into unfavorable health. This means when becoming an authorized user you’ll want to ensure that the primary individual is in sound financial health.

Which Companies Report Authorized Users

If you are worried about which credit card companies rest assured that nearly all of the major companies report authorized users. This includes American Express, Bank of America, Capital One, Chase, Citi and Discover. Should you ever find that you are unsure, you can always visit the company’s website and be able to locate that information.

While it may be difficult to obtain credit with lower credit scores there are still options to increase your score, including becoming an authorized user. When becoming an authorized user ensure you are on the account of someone who is financially sound. If they pay the card off on time and utilize low amounts of credit you will reap the benefits. However, if they are irresponsible you will be affected by the negative impacts. Authorized users are a great way to slowly build your score and eventually you’ll be able to obtain your own line of credit.