Signing up for an Authorized User account may make you wonder how these accounts can improve credit scores. Authorized users are not legally responsible for the balance on the account they have been authorized to use, so they do not have to make monthly payments. They can however build their credit history by using a creditcard for purchases.
Authorized users can purchase on their own
It is a smart move to add your child or teen as an authorized credit card user when they are old enough. This is a great way for them to learn about personal finance, borrowing responsibly, and how to manage their debt. These lessons are crucial for college students and young people. It can be a good idea to add students to your account, but it can also prove difficult.
Your credit score can be affected if you add an authorized user. Credit utilization plays a major role in determining your credit score. For example, if you have a credit limit of $1,000, and you make $300 on your monthly statement, you're using 30% of your credit limit. You can lower your overall usage by adding an authorized user to the account.
They aren't legally responsible for the remainder
The cardholder's legal responsibility is not on the authorized user unless they make unauthorised purchases or charge items on the account that they aren't authorized. However, in some states, a spouse of an authorized user can be held liable for the debt if the cardholder dies. Additionally, authorized users may also be joint account holders in communities property states and thus equally responsible for any debts.
If the primary account holder isn't happy with an authorized user charging anything, they can have them removed. Typically, it is as easy as making a phone call or submitting an online request. Some card issuers do not allow authorized users to be removed from their accounts.
They don't have to make payments every month
The good news? Adding an authorized person to your credit cards account can help build credit. Authorized users piggyback on the good payment history of the primary account holder. An authorized user should have a positive credit record as long the primary cardholder continues to make all payments on time. Some credit card issuers may not report authorized user accounts.
An option is to add your family member to the credit card. You can trust this person not to use the credit card for purchases that aren't necessary. You can keep the card as long as the limit is not exceeded.
They can make a credit record
If you are considering becoming an authorized user of someone else's credit card, you need to be careful with the way you use the card. While this account does have some benefits, it is not wise to misuse it. It can improve your credit score by being responsible with it.
A credit card account that has an authorized user can help improve credit scores. This will lead to lower rates and better access to products. If you fail to make payments on time, this can adversely affect your credit. In this case, you may want to consider applying for a secured credit card instead.