How does an authorized user on your credit card affect your credit score

When you add an authorized user to your credit card, this decision can have several implications for your credit score. An authorized user is someone you have allowed to make purchases with your credit card account, but who is not legally responsible for paying the balance. The activity on the account, however, reflects on both the primary cardholder’s and the authorized user’s credit reports.

Payment History and Utilization

The most direct way an authorized user can affect your credit score is through their impact on your payment history and credit utilization ratio. If the authorized user makes purchases and increases the card's balance, it is the primary cardholder’s responsibility to make payments. Consistent, on-time payments can positively affect your credit score, while late payments will negatively impact it. Similarly, if an authorized user adds to the balance and the card’s utilization ratio goes above the recommended 30%, it can lower the primary cardholder's credit score.

Length of Credit History

Adding an authorized user can also have an impact on the length of your credit history, particularly if the card is one of your older accounts. If the authorized user has a young credit history, being added to an older credit account can help them build a credit history. For the primary user, as long as the account remains in good standing, it can continue to fortify a long credit history which is beneficial for the credit score.

Pros and Cons for the Authorized User’s Credit Score

Credit Building for the Authorized User

For the authorized user, assuming the primary account holder has good credit habits, being added as an authorized user can be beneficial. It can help the authorized user build a credit history and potentially increase their credit score through positive payment history and an increased average account age—all without the legal responsibility to pay the monthly balance.

Risks of Negative Information

On the flip side, if the primary cardholder fails to make timely payments or runs up a high utilization rate, this can negatively reflect on the authorized user’s credit score as well. It is crucial for both parties to understand the risks and responsibilities involved in the credit relationship.

Removing an Authorized User

Effects of Removal on Credit Scores

If the relationship between the primary cardholder and the authorized user changes, removal of the authorized user is straightforward and can be done by the primary cardholder contacting the card issuer. Upon removal, the authorized user will lose the credit history associated with that card. For the primary account holder, removing an authorized user will likely have little direct impact on their credit score, assuming the account continues to be managed well.

Best Practices for Managing Authorized Users

• Clear Communication: It’s important for both parties to communicate openly about spending habits and payment arrangements to ensure the credit card account is managed responsibly.
• Set Limits: Some credit card issuers allow primary account holders to set spending limits for authorized users to prevent high balances.
• Monitor Credit Reports: Regularly monitoring your credit report can help you understand how an authorized user is affecting your credit score and take action if necessary.

Conclusion

Adding an authorized user to your credit card can either positively or negatively impact your credit score, depending on various factors such as payment history, credit utilization, and the length of the credit history. It is important for primary cardholders to recognize the potential risks and benefits before adding an authorized user, and for both parties to engage in open communication and responsible credit management.