Can you improve your credit score by being an authorized user on someone else’s credit card? If you have a damaged credit score, or are trying to build a credit score, you many need to get creative. Tough economic times don’t always allow you to build your credit score in a traditional way. It may be encouraging to know that your credit score will improve if you are an authorized user on a credit card account. The Fair Isaac or FICO company had eliminated this method, but as of the FICO 2008, your credit card use as an authorized use does affect your score. This is one way that you can improve your credit score but it can also hurt your score so there are some important facts to consider.
What is an Authorized User?
An authorized user is not the primary cardholder. It is a person that is chosen by the primary card holder to receive a card and have equal access to some features of the account. For example, a parent may be the primary card holder and the child an authorized user. Or one spouse may be the primary card holder and the other spouse is added as an authorized user. You don’t have to be related to be an authorized user. A boyfriend, girlfriend, roommate, or anyone else allowed by the primary card holder can be an authorized user.
Authorized users are reported to the major credit bureaus so that their credit scores will reflect the use of that credit card. Becoming an authorized user does not necessarily require your signature or even your knowledge. It does usually require that you have the same address. However, there are ways around this. If you receive a credit card in the mail that you unaware of then call the company and find out if you have been added to someone’s card that you do not want to be a user on.
Authorized users are different than joint users. Joint users have additional benefits that authorized users don’t have. For example, joint users can make payments, change contact information, access information online, and receive information over the phone concerning the account. Joint users can also request a credit limit change or close an account.
How is Your Credit Score Affected?
As stated before, your authorized use is reported to the three major credit bureaus. This is for both good and bad activity. Good activity includes paying off the balance monthly, making payments on time, and staying under 50% of the credit limit. When these things are done by the primary user, your credit score as an authorized user will increase as well. This is one way to increase your credit score or establish credit.
On the other hand, negative activity can decrease your credit score. If the primary user makes late payments, goes over the limit, or gets close to the limit, these things can decrease your credit score. You can contest the effect on your credit score if the activity is from the primary user, but contesting usually won’t change anything. Once you are an authorized user, your name is tied to the card.
Though you cannot be held responsible for the credit card debt, if the card goes into default or is turned over to a collection agency, your credit score will be affected greatly. A decreased credit score can result in not getting improved for a mortgage, having a higher interest rate on your credit cards, and even paying more for car insurance. It is very important to make sure you trust the primary card holder and know that they will be financially responsible.
What can You Do if the Primary Cardholder is Negligent?
If you do have a negative experience being an authorized user, you can call the credit card company and ask to be removed as a user. This is especially important in divorce situations or if your relationship with the primary card holder ends. Though you cannot remove the negative affects from your credit history, once you are removed as an authorized user, your credit score will slowly increase.
Before becoming an authorized user, you can try to get your own line of credit so that you know your card will be handled responsibility. The easiest way to do this is to compare what different credit cards have to offer online and choosing the card that is right for you. You can compare cards right now and find the card that has the features you are looking for.
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