Does being an authorized user build your credit?
Being an authorized user on someone else’s credit card can be a controversial topic, especially when it comes to building your own credit score. The answer to this question is not straightforward and depends on various factors. In this article, we will explore how being an authorized user can impact your credit, the potential benefits, and the risks involved.
Understanding the Role of an Authorized User
An authorized user is someone who has been granted permission to use another person’s credit card. This person does not have the legal responsibility to pay the bill, but their activity on the card will appear on the primary cardholder’s credit report. This can have both positive and negative implications for the authorized user’s credit score.
Benefits of Being an Authorized User
1. Building Credit History: One of the primary benefits of being an authorized user is that it can help you establish a credit history if you don’t have one. As long as the primary cardholder makes timely payments and keeps the credit utilization low, your credit score can benefit from the positive payment history.
2. Improving Credit Score: If the primary cardholder has a good credit score and a long credit history, being an authorized user can help you achieve a higher credit score. Lenders often look at the length of your credit history and the mix of credit accounts when determining your creditworthiness.
3. Learning Financial Responsibility: Being an authorized user can be a good way to learn about financial responsibility. Observing how the primary cardholder manages their credit can help you develop good financial habits.
Risks and Considerations
1. Limited Control: As an authorized user, you have limited control over the credit card’s usage and payments. If the primary cardholder fails to make payments or accumulates high debt, it could negatively impact your credit score.
2. No Legal Responsibility: While being an authorized user can help build your credit, you are not legally responsible for the debt. This means that you won’t be pursued for payment if the primary cardholder defaults on the debt.
3. Potential for Negative Impact: If the primary cardholder has a poor credit history or uses the card irresponsibly, it could harm your credit score. It’s essential to be cautious about who you become an authorized user for.
Conclusion
In conclusion, being an authorized user can build your credit if the primary cardholder maintains a good credit history and responsible credit card usage. However, it’s crucial to understand the risks and consider the potential negative impact on your credit score. Before becoming an authorized user, weigh the benefits against the risks and choose a primary cardholder who is financially responsible and has a positive credit history.
