Do authorized credit users build credit? This is a common question among individuals who are considering adding an authorized user to their credit accounts. The answer is both yes and no, depending on various factors. In this article, we will explore how authorized users can impact credit scores and the best practices for building credit through this method.
When an authorized user is added to a credit account, they gain access to the account holder’s credit line but are not responsible for repaying the debt. This arrangement can have both positive and negative effects on the authorized user’s credit score. Here’s how it works:
1. Positive Impact: If the account holder uses the credit responsibly and pays the bills on time, the authorized user can benefit from the positive payment history. This can help improve the authorized user’s credit score over time, as long as they do not exceed the credit limit and maintain a good payment history.
2. Negative Impact: Conversely, if the account holder misuses the credit or fails to make payments, the authorized user may be negatively impacted. This is because the authorized user’s credit report will reflect the account holder’s payment history, and late payments or high credit utilization can harm the authorized user’s credit score.
Here are some best practices for authorized users to build credit effectively:
1. Monitor the Account: Keep a close eye on the credit account to ensure that the account holder is using the credit responsibly. Regularly check for any errors or discrepancies in the account, and report them immediately.
2. Make Payments on Time: If the account holder is late on payments, the authorized user should encourage them to make timely payments. This will help maintain a positive payment history and benefit the authorized user’s credit score.
3. Keep Utilization Low: Avoid using the credit limit excessively, as high credit utilization can negatively impact the credit score. Aim to keep the credit utilization below 30% of the available credit limit.
4. Consider a Secured Credit Card: If the authorized user has limited credit history, they may consider applying for a secured credit card. This can help build credit by demonstrating responsible credit usage.
In conclusion, do authorized credit users build credit? The answer is yes, but it depends on the account holder’s behavior and the authorized user’s proactive management of the account. By following these best practices, authorized users can maximize the benefits of having their name on a credit account and build a strong credit history.
