Does being added as an authorized user help credit score?
Adding someone as an authorized user on a credit card can be a controversial topic when it comes to credit score improvement. The answer to this question is not straightforward and depends on various factors. In this article, we will explore the potential benefits and drawbacks of becoming an authorized user and how it might impact your credit score.
Understanding the Concept of an Authorized User
An authorized user is someone who has access to a credit card but is not the primary account holder. This person can make purchases, pay bills, and manage the account, but they are not responsible for the debt. The primary account holder is solely responsible for paying off the credit card balance and maintaining a good credit score.
Benefits of Being an Authorized User
1. Building Credit History: If the primary account holder has a long-standing and well-managed credit history, being an authorized user can help you establish or improve your credit history. Lenders use credit history to determine your creditworthiness, so having a positive history can be beneficial.
2. Access to Credit Limit: As an authorized user, you may gain access to a higher credit limit, which can improve your credit utilization ratio. A lower credit utilization ratio is generally viewed favorably by credit scoring models.
3. Positive Payment History: If the primary account holder consistently pays their bills on time, this positive payment history will reflect on your credit report as well. Timely payments are a crucial factor in determining your credit score.
4. Potential Credit Score Increase: In some cases, becoming an authorized user can lead to a slight increase in your credit score, especially if you were previously without a credit history or had a poor one.
Drawbacks and Considerations
1. No Control Over the Account: As an authorized user, you have no control over the primary account holder’s spending habits or payment behavior. If they misuse the card or fail to pay on time, it could negatively impact your credit score.
2. No Legal Responsibility: While you have access to the credit card, you are not legally responsible for the debt. However, if the primary account holder defaults on the payment, it could still affect your credit score.
3. Limited Impact on Credit Score: In some cases, becoming an authorized user may not have a significant impact on your credit score, especially if the primary account holder has a short credit history or a low credit score.
Conclusion
In conclusion, being added as an authorized user can potentially help improve your credit score, but it is not a guaranteed solution. It is essential to consider the pros and cons before becoming an authorized user. Ensure that the primary account holder has a strong credit history and is responsible with their credit card usage. Remember that the ultimate goal is to build a positive credit history of your own, and becoming an authorized user should be a stepping stone towards that goal.
