What is an Authorized User on a Credit Card?

If you’re new to building your credit history or have experienced setbacks in your credit scores due to financial mistakes, one effective way to improve your credit file is by becoming an authorized user on someone else’s credit card. This practice is often referred to as “piggybacking.”

Building and maintaining a positive credit history is essential for financial stability. One way to achieve this is by becoming an authorized user on someone else’s credit card, a process commonly known as “piggybacking.” This can be especially helpful if you are starting to establish your credit or trying to recover from past financial mistakes. By being added as an authorized user, you benefit from the primary account holder’s positive credit history, which can boost your own credit scores.

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What is an authorized user on a credit card?

Adding an authorized user to a credit card account is a way for trusted family members or friends to extend the benefits of their credit card to others. This process is usually free, although some issuers may charge a fee for adding authorized users. Once added, the authorized user receives a credit card associated with the account, enabling them to make purchases using the card.

When an individual becomes an authorized user, the credit card account’s history and payment information are reported on their credit reports. However, it’s important to note that the authorized user is not financially responsible for the charges made on the card; the primary account holder bears that responsibility.

Interestingly, an authorized user can have the account reported on their credit report without necessarily making any purchases using the card. For instance, parents can help build their child’s credit by adding them as an authorized user, even if they don’t give the physical card to the child. Some credit card issuers may not report activity to the child’s credit file until they reach the age of 18.

Moreover, primary cardholders can assist friends or family members who need to improve their credit without having to monitor the authorized user’s charges. They can add the individual as an authorized user without providing them with the physical card.

It’s worth noting that an authorized user does not have the authority to modify the credit card account, such as changing the credit limit or account terms. They are considered guests on the primary account holder’s card, and the responsibility for the account lies solely with the primary account holder. In the event of default, only the primary account holder is held liable for any outstanding balance. However, such a situation could negatively impact both the primary cardholder’s and authorized user’s credit scores.

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What are the benefits of being an authorized user?

Becoming an authorized user on someone else’s credit card can be beneficial for individuals with thin or non-existent credit histories. By adding a well-established card account to their profile, they have the opportunity to boost their credit score, provided the account remains in good standing. This can be particularly advantageous for young adults or newcomers to the United States who are looking to build their credit for the first time.

When you are added as an authorized user, the credit card account’s details, including credit limit, account balance, and payment history, are typically reported to the three major credit bureaus (Equifax, Experian, and TransUnion) by the lender. It is crucial to review your credit reports from all three bureaus after about 30 days to confirm that the account is being reported and positively impacting your credit profile. A great resource for obtaining free credit reports once a week until December 2023 is AnnualCreditReport.com.

Being an authorized user on a credit card with an excellent on-time payment history and low credit utilization can help offset negative information on your credit report, such as late payments or defaults. This strategy allows you to inject positive information into your credit history, potentially improving your credit score over time.

What are the benefits of having an authorized user

Becoming an authorized user on someone else’s credit card can be beneficial for individuals with thin or non-existent credit histories. By adding a well-established card account to their profile, they have the opportunity to boost their credit score, provided the account remains in good standing. This can be particularly advantageous for young adults or newcomers to the United States who are looking to build their credit for the first time.

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When you are added as an authorized user, the credit card account’s details, including credit limit, account balance, and payment history, are typically reported to the three major credit bureaus (Equifax, Experian, and TransUnion) by the lender. It is crucial to review your credit reports from all three bureaus after about 30 days to confirm that the account is being reported and positively impacting your credit profile. A great resource for obtaining free credit reports once a week until December 2023 is AnnualCreditReport.com.

Being an authorized user on a credit card with an excellent on-time payment history and low credit utilization can help offset negative information on your credit report, such as late payments or defaults. This strategy allows you to inject positive information into your credit history, potentially improving your credit score over time.

What to consider before being added as an authorized user

Authorized user status is sought to improve or establish a credit profile. However, it’s essential to be selective about who you approach for this privilege. Being added to a credit card with a history of late payments and high balances won’t benefit your credit score. The most critical factors affecting your score are payment history (35% of FICO Score) and credit utilization (30% of FICO Score).

To determine your credit score, you can check it using various methods available. As an authorized user, aim to be added to a card with a long history of on-time payments and a low balance. This will positively impact your credit profile. Additionally, being added to a card with a long credit history helps since it accounts for 15% of your credit score.

Remember that when someone adds you as an authorized user, they take on a risk. Misusing the card could damage both your credit scores and harm your relationship with the person who added you. Be responsible in your actions.

As an authorized user, you don’t have control over the account. If the primary cardholder faces financial difficulties and accumulates a large balance while missing payments, it may negatively affect your credit score. In such a case, removing yourself as an authorized user and applying for your own credit card might be a better option.

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If you have limited credit history, you can consider obtaining a secured credit card. This type of card requires a deposit to the issuer, which becomes your credit limit. It can be a way to start building your credit independently.

How to add and remove an authorized user

Adding an authorized user is a straightforward process. The primary account holder can either call the issuer or use the online portal to request the addition. The issuer will need the authorized user’s personal information, such as name, address, date of birth, and Social Security number, to proceed with the request. Some issuers offer the option to set a separate credit limit for the authorized user, which can provide added security for the primary account holder.

On the other hand, removing an authorized user is just as simple. Both the primary account holder and the authorized user can contact the issuer through the provided helpline or online channel to initiate the removal process. Once removed, the authorized user’s card becomes unusable, and it’s essential to be aware that this could impact their credit score, especially if it was a significant credit line.

In certain situations, it’s wise for an authorized user to remove themselves from the account. For instance, if the primary account holder is struggling with high credit card balances or falling behind on payments, it could negatively affect the authorized user’s credit score. By removing themselves, they can protect their credit history from such adverse actions.

If an authorized user wants to apply for their own credit card, it’s best to wait until they get approval for the new card before being removed from the primary account holder’s card. This approach prevents a sudden drop in the authorized user’s credit score that could potentially affect the new card application.

After being removed from the credit card account, the associated information should ideally fall off the authorized user’s credit reports. If it doesn’t happen naturally, they can dispute the account with the credit bureaus and request its removal from their credit profile.

These steps and considerations can help authorized users navigate their relationship with the primary account holder and manage their credit profile effectively.

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