Does being added as an authorized user increase credit score?
Being added as an authorized user on someone else’s credit card can be a great way to boost your own credit score. Credit scores are crucial for various aspects of life, including obtaining loans, renting apartments, and even getting certain jobs. Therefore, understanding how being an authorized user can impact your credit score is essential. In this article, we will explore the relationship between being an authorized user and credit score improvement.
How does being an authorized user work?
An authorized user is someone who is allowed to use another person’s credit card but is not responsible for repaying the balance. This arrangement is often seen in family settings, where parents add their children as authorized users to help them build credit. When you are added as an authorized user, your credit report will reflect the credit card account, and any positive payment history will be factored into your credit score.
How does being an authorized user affect credit score?
Being added as an authorized user can positively impact your credit score in several ways:
1. Length of Credit History: The longer your credit history, the better it is for your credit score. As an authorized user, you will benefit from the age of the credit card account, which can contribute to a higher credit score.
2. Payment History: If the primary cardholder maintains a good payment history, your credit score will reflect this positive behavior. Timely payments will be reported to the credit bureaus, improving your credit score.
3. Credit Utilization: The credit utilization ratio is the percentage of your available credit that you are using. As an authorized user, you will benefit from the primary cardholder’s low credit utilization, which can help lower your own credit utilization ratio.
4. Types of Credit: Being an authorized user on a credit card account adds a different type of credit to your credit mix, which can positively impact your credit score. A diverse credit mix is seen as a sign of responsible credit management.
Are there any downsides to being an authorized user?
While being an authorized user can have numerous benefits, there are a few potential downsides to consider:
1. Negative Payment History: If the primary cardholder fails to make payments on time, this negative information will be reflected on your credit report, potentially lowering your credit score.
2. Lack of Control: As an authorized user, you have no control over the primary cardholder’s spending habits or payment behavior. This can be risky if the primary cardholder is not financially responsible.
3. Account Closure: If the primary cardholder decides to close the credit card account, you may lose the benefits of having that account on your credit report, which could negatively impact your credit score.
Conclusion
In conclusion, being added as an authorized user can increase your credit score by contributing to your credit history, payment history, credit utilization, and credit mix. However, it is important to be aware of the potential risks and to choose a primary cardholder who is financially responsible. By understanding the benefits and drawbacks of being an authorized user, you can make an informed decision that can help you improve your credit score.
