Will being an authorized user raise my credit score?
Being an authorized user can be a beneficial arrangement for those looking to improve their credit score. Essentially, an authorized user is someone who is allowed to use another person’s credit card but is not responsible for repaying the debt. The primary question on many people’s minds is whether this arrangement will positively impact their credit score. The answer is yes, in most cases, being an authorized user can help raise your credit score, but there are certain factors to consider.
Understanding the Impact of Being an Authorized User
When you become an authorized user on someone else’s credit card, the card’s positive payment history and credit utilization will be reflected on your credit report. This can be advantageous because credit scoring models take into account various factors, such as payment history, credit utilization, length of credit history, and types of credit used.
Positive Payment History
One of the most significant benefits of being an authorized user is the potential to improve your payment history. If the primary cardholder has a good payment history, this will positively affect your credit score. Lenders and credit scoring models favor individuals with a strong payment history, as it demonstrates reliability and trustworthiness in managing debt.
Credit Utilization
Credit utilization is another factor that can be positively impacted by being an authorized user. If the primary cardholder has a low credit utilization ratio (i.e., the amount of credit they are using compared to their credit limit), this can help lower your overall credit utilization ratio. A lower credit utilization ratio is generally seen as a positive indicator of financial responsibility, which can contribute to a higher credit score.
Length of Credit History
The length of your credit history is also a factor in credit scoring. By being an authorized user, you can benefit from the primary cardholder’s long-standing credit history. This can help establish a longer credit history for you, which may improve your credit score.
Types of Credit Used
Credit scoring models consider the types of credit you have used. By being an authorized user, you can gain exposure to different types of credit, such as revolving credit (credit cards) and installment loans. This diversity in credit types can positively influence your credit score.
Considerations and Risks
While being an authorized user can raise your credit score, there are some considerations and risks to keep in mind. First, if the primary cardholder has a poor payment history or high credit utilization, it could negatively impact your credit score. Additionally, if the primary cardholder decides to close the account, it may affect your credit score, as the account’s age and positive payment history will no longer be reflected on your credit report.
Conclusion
In conclusion, being an authorized user can raise your credit score by positively impacting various factors such as payment history, credit utilization, length of credit history, and types of credit used. However, it is crucial to choose a primary cardholder with a good credit history and to be aware of the potential risks involved. With careful consideration, becoming an authorized user can be a valuable strategy for improving your credit score.
