What is an authorized user?

An authorized user is someone who is added to a credit card account or a bank account through the primary account holder. When the authorized user is added to the account, they are given the opportunity to help build their credit score if they don’t have one. Anyone can become an authorized user as long as they meet the age requirements and the primary account holder authorizes it. There are a wide variety of benefits for becoming an authorized user, continue reading to learn more about the pros and cons of becoming one.

How does an authorized user work?

When signing up for a credit card, many have the option to add an authorized user. Essentially, this authorized user joins the primary cardholder’s account in order to make purchases. Even though an authorized user is connected to the primary user’s account, they will be able to request their own card and will typically be able to view the balance. Additionally, the primary user will be able to to see what the authorized user spends and the remaining balance. 

What responsibilities does an authorized user have?

Even though authorized users have access to the credit, they are not obligated to make payments. However, paying off this balance can help one get in the habit of good credit behavior. Due to this, primary users are responsible for any outstanding balances on the account. But, since a major component of becoming an authorized user is to help build credit, it is encouraged that the authorized user pays off their own balance. 

How does being an authorized user affect your credit?

Becoming an authorized user is especially beneficial for those who have a low or nonexistent credit score. When you are added onto an account, the primary cardholder’s credit history with that account may be reflected in your credit report. Therefore, if the primary cardholder has a long credit history of on-time payments and good credit behavior for that account, it could help boost the authorized user’s score if an authorized user is also reported to the credit bureaus However, it is important to note that if you decide to no longer be an authorized user, this could decrease your credit score due to the new account’s age. 

Risks to adding an authorized user

As a primary user, there is risk involved when adding an authorized user. Even though you are helping them build credit, you are taking on the risk of possibly hurting your own credit score. If the new authorized user does not have good financial management skills and frequently maxes the card out this might leave you prone to a decrease in your credit score due to higher credit utilization. The primary cardholder is also fully responsible for any debt incurred – even debt added by the authorized user. 

How to add or become an authorized user

Depending on the credit card company, the process varies. However, most commonly, the primary cardholder will have to either call, fill out an online form, or a paper application to the credit card company. Once the authorized user is verified the credit card company will ship a new credit card in the user’s name and add them to the account. Additionally, after the end of the next billing cycle this account should show on the authorized user’s credit report.  

How to remove and get removed as an authorized user

Similar to adding an authorized user, to remove one or remove yourself requires one contacting the credit card company. This can be done either by calling them or done online. If you are the primary user of the account, removing an authorized user from the account will not affect your credit score. Alternatively, as the authorized user, this could have some impact on your score. Depending on how the credit card company reports their authorized user accounts, this account can be removed from the authorized user’s credit report. You can verify whether this account was removed on your report by checking after 30 to 45 days of removal. 

Authorized user vs joint account holder

Put simply, an authorized user is an additional person added to the primary cardholder’s account therefore making them not responsible for the credit card balance. However, a joint account means both cardholders are equally responsible for their balance. Additionally, with an authorized user essentially the primary cardholder is allowing them to access their account’s credit. Whereas signing up for a joint account is vouching for the other person’s purchases since you are both equally liable.

Other ways to build or establish credit

Even though becoming an authorized user is a great start for those who have no credit to help build credit, there are other ways to establish your score. Here we explain some other approaches one should take into account prior to becoming or adding an authorized user.  

Credit builder loan

A credit builder loan is designed for those with little or no credit history to help establish their credit.. Unlike other loans, typically you are unable to access the loan’s amount until you have fully repaid it. This is a great way not only for someone to help build their credit by making on-time payments, but additionally, helps one save. 

Unsure where to find or apply for a credit builder loan? Look into MoneyLion’s Credit Builder Loan. Unlike some other credit builder loansMoneyLion’s Credit Builder loan gives a portion of the loan’s amount upfront. This allows you to have access to some capital while practicing good credit and saving habits. 

Secured credit card

Unlike most credit cards, where these companies give you upfront capital which you pay off at the end of the billing cycle, secured credit cards work reversely. A secured credit card typically has to have a security deposit paid prior to utilizing the card’s funds. Since this card is designed for those with little to no credit experience, banks want to ensure you will be able to pay them back by charging a security deposit fee. This fee reduces the risk for the bank while it allows you to help build your credit score with on-time payments and building a credit history.

Start building your credit now

Becoming an authorized user is a great way to help build your credit, but it does come with some downsides. The main risk is that the primary cardholder is solely responsible for paying off the credit card’s balance, including the authorized user’s debt. Due to this, many may be hesitant to add an authorized user onto their credit card account especially if the user does not have a history of making on-time payments. However, there are other ways to build credit outside of becoming an authorized user. This includes secured credit cards and credit builder loans. Look into MoneyLion’s Credit Builder Loan. Unlike other credit builder loans, MoneyLion’s loan will allow you to not only save and help build credit but also gives you a portion of your loan’s funds up front.

FAQS

What is the point of an authorized user?

Becoming an authorized user is a great way to help build credit when you have little to no credit experience. By being added as an authorized user, the primary cardholder’s good credit behavior for that account will be reflected in your credit score report.

Does making someone an authorized user help their credit?

Yes, it can. By making someone an authorized user it can help their credit score. However, as a primary cardholder, having an authorized user has little impact on your score.

Will my credit score drop if I’m removed as an authorized user?

Yes, it can drop if you do not have a long credit history in comparison to the primary cardholder’s. Since payment history accounts for 35% of your overall credit score, opening a new account or removing yourself as an authorized user can have an impact on your score.