What is an Authorized User?

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What is an Authorized User?

An authorized user is someone who is added to another person’s credit card account. The authorized user can use the credit card, but they aren’t legally responsible for paying the balance. Being added as an authorized user can help you build credit if the account is managed responsibly.

How Becoming an Authorized User Can Help (or Hurt) Your Credit

Becoming an authorized user on someone else’s credit card can be a simple way to build your credit history without needing to qualify for your own card. However, it’s not without risks. Before you become an authorized user—or add someone to your account—it’s important to understand when it can help, when it can hurt, and what to consider before moving forward.

An authorized user is someone who has permission to use another person’s credit card to make purchases but isn’t legally responsible for repaying the debt incurred. This person doesn’t have an individual account but will receive regular statements and some access to the account online.

When Can Being an Authorized User Help Your Credit?

Building a Credit History: Authorized users can start building credit even without their own income or established accounts. Positive payment history from the primary account holder can be reported to credit bureaus and reflected on the authorized user’s credit report.

Access to Credit Benefits: Authorized users may gain access to benefits like rewards programs, fraud protection, and easier purchasing ability without having full financial responsibility for the account.

Financial Education: Each card issuer has different rules, policies, and processes for adding authorized users (including minors) to credit card accounts. This can be a beneficial way for children and young adults to understand credit and potentially build their credit before adulthood.

When Can Being an Authorized User Hurt Your Credit?

Missed or Late Payments: If the primary account holder misses payments or carries high balances, it can negatively impact the authorized user’s credit, too. This will depend on how the card issuer reports authorized user activity.

High Credit Utilization: A high balance relative to the account’s credit limit can affect the credit utilization ratio, which may negatively impact the authorized user’s credit score even if they don’t make any purchases themselves.

What to Consider Before Becoming or Adding an Authorized User

Choose Carefully: Trust and communication are critical. Make sure both the primary account holder and authorized user are clear about expectations and responsibilities.

Monitor the Account: Regularly review credit card statements to ensure responsible use of the card and on-time payments. Make sure the account doesn’t fall into poor standing, which could restrict your ability to access your account.

Understand the Issuer’s Reporting Policies: Some card issuers report authorized user activity to credit bureaus, while others may not. Check with the issuer to understand what they report and what impact it may have on both parties.

Being an authorized user can be a powerful credit-building tool—but only when both the primary account holder and the authorized user both take responsibility. You can protect your financial future by carefully weighing the pros and cons of becoming or adding an authorized user.