Back in the day becoming an authorized user on another person’s credit card was a great way build and even rebuild your credit. Things have changed in recent years and even though being an authorized user is a great tool for building credit, there are a few things that have changed.
Let’s get into the details of how you should use this credit building tool to your advantage.
What exactly being an authorized user means
When you become an authorized user on another person’s credit card account, you’re issued a credit card in your name. You’re able to use this credit card in the same way that the primary user uses it, however you’re not legally obligated to pay the debt.
The primary user is responsible for paying the debt on the credit card. This also means that if you’re an authorized user and you use the credit card irresponsibly, the primary user is on the hook for it. I’ll get more into this later.
Generally the reason why a person becomes an authorized user on another person’s credit card rather than just getting a credit card in their own name is that the person has poor credit and wouldn’t be approved.
How being an authorized user can help you credit score
Several years ago it was a common credit repair practice to become an authorized user in order to rebuild your credit score. Notice that I said “rebuild”. In other words, being an authorized user is still a good tool for establishing your credit if you don’t have credit history, but won’t really help you rebuild your score if you have poor credit due to negative entries.
I also want to note that being an authorized user isn’t going to have a huge impact on your credit score if you don’t have any prior credit history, but it will help, so why not take advantage of it?
Again, I suggest using the technique of becoming an authorized user as a tool for establishing good credit rather than rebuilding bad credit. There is a big difference and many people make the mistake of thinking that they are going to improve their bad credit by becoming an authorized user on their spouse’s credit card. It simply won’t impact your bad credit.
A word caution
Lastly, I want to give out a sincere word of caution of those who of you who are considering letting another person become an authorized user on your credit card.
I’ve been running this blog of over 10 years and I’ve literally receiving hundreds of emails from readers who tell me that they let a family member become an authorized user, the family member ran up the credit card bill and now they are on the hook for a bill they can’t afford.
You have to realize that there’s a real possibility that this will happen to you. I’m not saying your family member will intentionally harm you financially but this type of stuff happens all the time and you need to keep in mind the risk you are taking by allowing somebody to use credit in your name.
That said, if you truly want to help out a young family member, perhaps your college bound son or daughter, letting them become an authorized user on your credit card is a tool that will help them build some positive credit history.