Of all the factors that affect credit, the one you have the least control over is the age of your credit. After all, just like your real age, your loan age can be as old as it is. However, “least” control does not mean no control. Becoming an authorized user can help you strengthen this component of your credit score.
What is the difference between an authorized user and a primary cardholder?
Becoming an authorized user of someone else’s account simply means that the credit card issuer has been contacted by the primary cardholder or account holder requesting that you be added to their account. You usually receive a card with your name on it.
This is the primary cardholder who has an agreement with the credit card issuer, not an authorized user. The issuer will always refer to the principal for payment and almost all bill changes.
It is important to ensure that you are added to an account in good standing – this means that the first two credit scoring factors are handled responsibly by the primary cardholder. This is because their payment history and credit usage (as well as other lower impact factors) will now become part of your credit file. So your ideal candidate should have a card with a long, intact payment history and a low balance relative to their credit limit.
If you find that your card is being mishandled and it lowers your score, you can usually ask the issuer to remove you from your account as an authorized user. Experian will automatically remove an authorized user account from its credit report if it becomes negative. Other bureaus are currently not. So, if you are an authorized user, check your TransUnion and Equifax credit reports more often in case the account holder has financial problems.
Once you have been removed, the card will no longer count towards your credit score. Keep in mind, however, that this includes your credit age, so deleting yourself will cut your age down, according to Experian.
But if the account has a bad reputation, you’re better off losing that part anyway. No one benefits from negative information on their credit report. If you’re new to lending or starting over after a divorce or bankruptcy, you should be especially careful to avoid negative information on your credit report, especially if it’s not your fault.
[graphi_callout]Make sure your lender adds authorized user reports to the credit bureau. Not all. If there is no reporting, there is no rating increase.[/graphi_callout]
Who will benefit the most from becoming an authorized user?
Those who are new to credit or starting over after bankruptcy will benefit the most from being added to a mature account in good standing. This is why parents often add children to their credit cards as authorized users. But you don’t have to be associated with the primary cardholder to be added as an authorized user.
In any case, it is recommended that both parties agree from the outset on how the authorized user can use the card and how it will be charged. Keep in mind that the card issuer is dealing with the primary cardholder and is the one they will be contacting for payment. Your payment arrangements will be between you and the cardholder, not between you and the card issuer, which can cause relationship stress.
For example, when a card is issued, the statement is sent to the account holder, who is solely responsible for payment. The account owner must then request payment from the authorized user. If you owe the master account holder more money than you are comfortable paying at the moment, or there is disagreement about when you will pay an authorized user, this can lead to resentment.
To avoid this scenario, it is important that the owner and user clearly understand what is required and how the device will work. You may put your agreement in writing. You don’t need the agreement to stand in court, it just needs to make clear what can be misunderstood, misheard, or accepted, especially if you’re not familiar with the loan.
For those who just want to increase their credit, I recommend that the primary cardholder add them to the account, but don’t give them the card. An authorized user benefits from a good account history without the drama of having the owner become the de facto lender. Although they will not have access to new credits, they will receive a points boost. And that’s what it’s really all about.
If you already have enough information to create a credit report, chances are added since an authorized user won’t make much of a difference in your score. But as long as you’re both accommodating and the account holder always pays bills on time, adding points won’t hurt. Just know that there are other things that will help you more.
What else can you do to boost your credit?
Becoming an authorized user is not the only way to increase your score. While this can be helpful, the actions you take on your own can be more beneficial. First of all, make sure you pay all your bills on time and as agreed. Enrolling in a free program like Experian Boost will allow you to take advantage of your good utility and mobile payment history.
Please note that this program will only benefit your Experian score. If you’re a renter, you might be better off signing up for a program that reports your rent payments to the credit bureaus (this isn’t standard practice for most landlords, so you’ll have to ask if this already does for you).
Retail and gas credit cards tend to have lower credit requirements, so you might want to consider signing up for one. You can also look into starter credit cards for beginners, such as secure cards or student ID cards if you are in school. Adding such a positive story to your credit report is the best way to start building a credit score you can be proud of.
Adding yourself to a credit card as an authorized user can help you improve your credit score. To get the best results, the master card holder must have good financial habits. This can be a good option if you need to improve your credit score, but make sure you and the primary cardholder have an agreement on how and when you will reimburse them.
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