Does being an authorized user help credit?
Being an authorized user on someone else’s credit card can be a topic of much debate. Credit scores are crucial for various aspects of life, including renting an apartment, obtaining a loan, or even getting a job. Therefore, understanding how being an authorized user can impact credit is essential for anyone considering this financial arrangement.
Understanding Credit Scores
Credit scores are numerical representations of an individual’s creditworthiness. They are based on various factors, such as payment history, credit utilization, length of credit history, types of credit used, and new credit. A higher credit score indicates a lower risk for lenders, making it easier to secure loans and credit at favorable terms.
The Impact of Being an Authorized User
Being an authorized user on someone else’s credit card can have both positive and negative effects on your credit score.
Positive Effects
1. Payment History: If the primary cardholder has a good payment history, this can positively impact your credit score. As an authorized user, you benefit from the primary cardholder’s timely payments, which contribute to your credit history.
2. Credit Utilization: If the primary cardholder has a high credit limit and low credit utilization, being an authorized user can help you achieve a similar ratio. This can improve your credit score, as credit utilization is a significant factor in determining your score.
3. Length of Credit History: By being an authorized user, you can benefit from the primary cardholder’s long credit history. This can help you establish a longer credit history, which is beneficial for your credit score.
Negative Effects
1. Late Payments: If the primary cardholder fails to make timely payments, this can negatively impact your credit score. As an authorized user, you are responsible for any late payments made on the account, even if you did not make the purchases.
2. Credit Utilization: If the primary cardholder has a high credit utilization, this can also affect your credit score. As an authorized user, you are linked to the primary cardholder’s credit utilization, which can lower your score if it is too high.
3. Account Closure: If the primary cardholder closes the credit card account, this can negatively impact your credit score. Although you are not the primary account holder, your credit score can still be affected due to the loss of the credit history associated with the account.
Conclusion
In conclusion, being an authorized user on someone else’s credit card can help improve your credit score if the primary cardholder has a good payment history, low credit utilization, and a long credit history. However, it can also have negative effects if the primary cardholder has poor credit habits. It is essential to weigh the pros and cons before becoming an authorized user to ensure that it benefits your credit in the long run.
