Does becoming an authorized user hurt credit?
Becoming an authorized user on someone else’s credit card can be a topic of much debate. Many individuals consider adding themselves as an authorized user to boost their own credit score, while others are concerned about the potential negative impacts. In this article, we will explore whether becoming an authorized user can hurt your credit and provide some insights to help you make an informed decision.
Understanding Credit Scores
Before diving into the question of whether becoming an authorized user affects credit, it’s essential to understand how credit scores work. Credit scores are numerical representations of an individual’s creditworthiness, typically ranging from 300 to 850. Lenders use these scores to assess the risk of lending money to a borrower. Factors that contribute to credit scores include payment history, credit utilization, length of credit history, types of credit used, and new credit accounts.
Benefits of Being an Authorized User
There are several benefits to becoming an authorized user on someone else’s credit card:
1. Credit Score Improvement: As an authorized user, you may benefit from the positive payment history of the primary cardholder. This can help boost your credit score, especially if the primary cardholder has a long and positive credit history.
2. Building Credit History: If you have little or no credit history, becoming an authorized user can help establish a credit profile. This can be particularly helpful for young adults or individuals who have recently moved to a new country.
3. Types of Credit: Being an authorized user can expose you to different types of credit, such as revolving credit (credit cards) and installment loans. This diversity can also positively impact your credit score.
Drawbacks of Being an Authorized User
While there are benefits, there are also potential drawbacks to becoming an authorized user:
1. Shared Responsibility: As an authorized user, you are responsible for any charges made on the card. If the primary cardholder fails to pay the balance, it can negatively impact your credit score.
2. Negative Payment History: If the primary cardholder has a history of late payments or defaults, it can hurt your credit score. This is because your credit report will reflect the authorized user relationship, along with the primary cardholder’s payment history.
3. Lack of Control: As an authorized user, you have limited control over the primary cardholder’s spending habits. This can lead to unexpected charges and potentially negative impacts on your credit score.
Conclusion
In conclusion, becoming an authorized user can potentially hurt your credit if the primary cardholder has a poor payment history or if you are not actively monitoring the account. However, if the primary cardholder has a strong credit history and you maintain a good relationship with them, it can be a valuable tool for building and improving your credit score. Always weigh the pros and cons before deciding to become an authorized user and make sure you understand the responsibilities and potential risks involved.
