How does becoming an authorized user work?
Becoming an authorized user on someone else’s credit card can be a beneficial step for individuals looking to improve their credit score or establish credit history. This arrangement allows an individual to gain access to the credit card account of another person, thereby benefiting from the credit history and payment behavior of the primary cardholder. Here’s a detailed explanation of how becoming an authorized user works.
1. Agreement between the primary cardholder and the authorized user:
The process begins with an agreement between the primary cardholder and the authorized user. The primary cardholder must consent to adding the authorized user to their credit card account. This agreement is typically made through the credit card issuer, which may require the authorized user to provide personal information, such as their name, address, and Social Security number.
2. Credit card issuer updates the account:
Once the authorized user is added to the account, the credit card issuer updates the account to reflect the new user. The authorized user will receive a card, if desired, and will have access to the credit line of the primary cardholder. However, the authorized user is not responsible for the account’s balance or payments; the primary cardholder remains solely responsible for managing the account.
3. Credit reporting:
The primary cardholder’s credit behavior, such as on-time payments, credit utilization, and account age, will be reflected on the authorized user’s credit report. This can be beneficial for the authorized user, as long as the primary cardholder maintains good credit habits. As long as the account is in good standing, the authorized user can benefit from the positive credit history, which can help improve their credit score over time.
4. Risks and responsibilities:
While becoming an authorized user can be advantageous, it’s important to understand the risks and responsibilities involved. The authorized user is not responsible for the account’s balance or payments, but they may be liable for any unauthorized charges made to the account. Additionally, if the primary cardholder fails to make payments, it can negatively impact the authorized user’s credit score.
5. Removing the authorized user:
At any time, the primary cardholder can remove an authorized user from the account. The authorized user’s credit score will no longer be affected by the account once they are removed. However, if the account remains in good standing, the authorized user may continue to benefit from the positive credit history until the account is closed.
In conclusion, becoming an authorized user can be a valuable tool for individuals looking to improve their credit score or establish credit history. By understanding the process and the responsibilities involved, both the primary cardholder and the authorized user can make informed decisions about this arrangement.
