What Happens When You Become an Authorized User on a Credit Card Account?

Credit cards are popular financial tools that you can use to make purchases from stores around the world.

More than 180 million Americans have at least one credit card and billions of dollars flow through card each year.

If you have a credit card, you can add another person as an authorized user for your card.

If you don’t have a card, but need access to one, you can ask someone else to make you an authorized user on their account.

How does being an authorized user work?

What is an Authorized User

First, let’s discuss what an authorized user is.

When you sign up for a credit card, you’ll receive a physical card with your name and the account number on it.

You can use the card at stores to make purchases and the charges will be added to the balance of the card. The cardholder has a legal responsibility to pay back the money they borrow using the card.

When you are made an authorized user of someone else’s credit card, you’ll receive your own physical card.

Your card will have the same account number, but it will have your name on it instead.

Authorized users can use the card that they receive just the same as if they were the primary owner of the account.

Any amounts charged on the authorized user’s card will be added to the card balance of the primary account holder.

The account holder can add as many authorized users as the card issuer will allow. You should be able to add as many as three or five authorized users without drawing much attention. Often, adding an authorized user is free of charge.

But:

Certain cards that offer premium benefits will charge a fee for authorized users, as those users will also get access to those benefits.

One thing to note is that adding someone as an authorized user does not, in any way, obligate them to pay a portion of the credit card bill.

While they are welcome to pay for their use of the card, the only person who remains legally responsible for paying the balance is the primary account holder.

Why?

You might be wondering why you would want to add an authorized user to your account or why you would want to become an authorized user on someone else’s card.

Extending access to a card

One of the most common reasons is to give someone else access to your card when you’re already sharing finances.

For example, a couple might make each other authorized users on each other’s cards to make it easier to share their finances.

Parents might also want to add their children as authorized users on their cards in case the children need access to a card in an emergency.

People with premium cards that offer perks like airport lounge access commonly add friends and family as authorized users.

This can give those trusted people cheap or free access to these perks.

Build credit

Another reason you would want to become an authorized user on a credit card is to help improve your credit score.

When you become an authorized user on a card, there is no credit check or process by which the card issuer might decide to deny you.

Why?

Authorized users are not legally responsible for paying the charges that they make using the card.

The only person who is responsible is the original account holder.

Even if you have terrible credit, someone with a card can make you an authorized user.

This can help you improve your credit because some card issuers report account details to the credit reports of authorized users.

If the true account holder uses the card well, that can be great for your credit score.

What Happens When You Become an Authorized User

Assuming the card issuer reports account details to authorized users’ credit reports, a number of things happen when you become an authorized user.

The first is that the full history of the credit card that you are now an authorized user of gets added to your credit report.

This means that you’ll see the full payment history, credit limit, and other details of the account the next time that you take a look at your credit report.

This can be a good thing for your credit score. If the account holder has paid the bill on time every month, you could get months or years’ worth of payments added to your credit file overnight.

It’s even better if the balance on the card is low as this will drive down your credit utilization ratio, giving your credit score a further bump.

However, becoming an authorized user on an account that has been handled poorly can have a negative effect on your credit.

If the account holder has missed payments, those missed payments will show up on your credit report to. If you don’t have any missed payments in your history, this could drop your score by a huge amount.

Similarly, any balance on the card will start to show up on your report. If the accountholder carries a significant balance on the card, your score will drop.

As an authorized user on a credit card for the purpose of improving your credit score, you need to trust the account holder.

If they manage the account responsibly, it will reflect well on you and your score will improve. If they don’t manage the account properly, it could hurt your score instead.

How Credit Scores are Calculated

To understand how becoming an authorized user on a credit card can improve your credit score, you have to know how credit score work.

Your credit score is a number between 300 and 850. Higher scores are considered better, with any score over 750 being considered excellent.

FICO credit scores (used by the majority of U.S. lenders) are calculated using five factors:

The most important of these factors is your payment history, which accounts for more than a third of your credit score.

You want to build a long history of on-time payments and to never miss a payment.

The second most important factor is the amount that you owe.

The less you owe overall, as well as the less you owe as a percentage of your credit card’s credit limit, the better it will be for your score.

To get the maximum benefit out of becoming an authorized user, make sure the account holder has never missed a payment and has a long history of paying their bills.

Also, make sure that the account holder doesn’t run up their card balance.

Removal of an Authorized User

Becoming an authorized user on a credit card is not a permanent thing. The account holder can easily remove you from the account by contacting the card issuer.

You might want to remove an authorized user from your credit card for a number of reasons.

You might not want the person to have access to your card anymore, or the person might be ready to get a card of their own.

You might also be planning to close the account, and the card issuer requires that you remove the authorized user.

Regardless of why you’re removing the authorized user, it’s important to notify those authorized users ahead of time.

If you’re the authorized user being removed from an account, you should know how it will affect you.

Of course, you’ll no longer be able to use the credit card, but there are other effects to consider.

If the card was doing good things for your credit, due to solid payment history and low utilization, your credit score will take a hit.

When you are removed as an authorized user, the card issuer will stop reporting the account details to your credit report, that means that the account will stop showing up on your report.

If possible, you should apply for a card of your own before the authorized user account falls off your report.

You can qualify for your own card while your score is good and use it to start building your credit score independently.

If you are an authorized user on an account that is having a negative effect on your credit score, it is possible to remove yourself from the account.

Contact the credit card company and request that they remove you as an authorized user. They will do so, even if the account holder would not.

Make sure to destroy the card once you’ve been removed as an authorized user. Also, contact the credit bureaus and request that the account history be removed from your report.

Conclusion

Becoming an authorized user on a credit card account can be a good way to improve your credit score if you can get a credit card of your own.

Find someone with a good track record of paying their bills on time and ask to become an authorized user.

Your score will jump and you might be able to qualify for a card of your own.

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