Does an authorized user on a credit card build credit? This is a common question among individuals who are considering adding an authorized user to their credit card account. The answer is yes, an authorized user can indeed build credit, but there are certain conditions and considerations to keep in mind. In this article, we will explore how authorized users can impact credit scores, the benefits and drawbacks of adding an authorized user, and the best practices for building credit through this method.
When an authorized user is added to a credit card account, the primary cardholder grants them the ability to make purchases and transactions using the card. However, the primary cardholder remains responsible for the full balance and any fees or charges incurred by the authorized user. Despite this, the credit reporting agencies typically consider the authorized user’s activity on the account when calculating their credit score.
One of the primary benefits of adding an authorized user is that it can help build credit history. If the authorized user uses the card responsibly and pays their bills on time, this positive behavior will be reflected in their credit report. Over time, this can lead to an improved credit score. Additionally, having a longer credit history can also contribute to a higher credit score, as long as the account remains open and active.
However, there are some drawbacks to consider when adding an authorized user. First, if the authorized user misuses the card or fails to pay their bills on time, it can negatively impact the primary cardholder’s credit score. Since the primary cardholder is ultimately responsible for the account, any late payments or high credit utilization will reflect on their credit report as well. Second, adding an authorized user may not have the same impact on the authorized user’s credit score as opening a new credit card account would.
Here are some best practices for building credit through an authorized user account:
– Ensure the authorized user has a good credit history and is responsible with credit.
– Set clear expectations regarding the authorized user’s spending and payment responsibilities.
– Monitor the authorized user’s activity on the account and provide guidance if necessary.
– Encourage the authorized user to pay their bills on time and keep their credit utilization low.
– Consider adding an authorized user to an existing credit card account with a long history and good credit score.
In conclusion, an authorized user on a credit card can build credit, but it is essential to approach this arrangement with caution. By selecting the right person, setting clear expectations, and maintaining responsible credit behavior, both the primary cardholder and the authorized user can benefit from the credit-building potential of this arrangement.
