Does being added as an authorized user help your credit?
Being added as an authorized user on a credit card can be a valuable tool for building or improving your credit score. However, the extent to which it benefits your credit depends on various factors. In this article, we will explore how being an authorized user can impact your credit and provide insights into the best practices for maximizing its benefits.
Understanding the Role of an Authorized User
An authorized user is someone who has access to a credit card account but is not the primary cardholder. The primary cardholder is responsible for the account, including paying the bills and managing the credit limit. When you are added as an authorized user, you can use the card for purchases, but your credit score is not directly affected by your spending habits or payment history.
How Being an Authorized User Can Help Your Credit
1. Building Credit History: If you have no credit history or a limited one, being an authorized user can help establish a positive credit history. As long as the primary cardholder maintains a good payment history, the authorized user’s credit report will reflect that as well.
2. Credit Utilization Ratio: Your credit utilization ratio is the percentage of your available credit that you are currently using. By being an authorized user, you can benefit from the primary cardholder’s available credit, which can lower your own credit utilization ratio and improve your credit score.
3. Length of Credit History: The length of your credit history is a significant factor in your credit score. By being an authorized user, you can gain the benefit of the primary cardholder’s long-standing credit history, which can positively impact your score.
4. Payment History: If the primary cardholder consistently pays their bills on time, this positive payment history will be reflected on your credit report as well. This can help you build a solid payment history, which is crucial for a good credit score.
Best Practices for Being an Authorized User
1. Choose a Responsible Primary Cardholder: Ensure that the primary cardholder has a good credit history and is responsible with their credit card. This will maximize the benefits of being an authorized user.
2. Monitor Your Credit Report: Regularly check your credit report to ensure that the authorized user status is accurately reflected and that the primary cardholder’s positive payment history is being reported to the credit bureaus.
3. Avoid High Credit Utilization: Even as an authorized user, try to keep your own spending within your means and avoid maxing out the credit card. This will help maintain a low credit utilization ratio.
4. Do Not Close the Account: If you are benefiting from the primary cardholder’s credit history, it is best not to close the account. Closing an account can negatively impact your credit score and reduce your available credit.
Conclusion
Being added as an authorized user can help your credit in several ways, including building credit history, improving your credit utilization ratio, and enhancing your payment history. However, it is crucial to choose a responsible primary cardholder and monitor your credit report to ensure that the benefits are being maximized. By following these best practices, you can effectively leverage the advantages of being an authorized user to improve your credit score.
