How to Build Credit When You are the Authorized User

Good credit can help individuals secure a mortgage for their dream home, a loan for their own business, or even rewards credit cards that earn rewards or cashback on daily purchases. However, building good credit from scratch can be tough. Many people wonder how to build credit when they can’t afford a deposit for a secured credit card or interest on a credit builder loan. Becoming an authorized user may be the answer.  

Who Is an Authorized User? 

Primary credit cardholders can add authorized users to their accounts, granting them the ability to use the card for purchases, payments, etc. This co-user is known as an authorized user. An authorized user usually gets their physical credit card linked to the same account, but they’re not responsible for paying the credit card balance. When an individual becomes an authorized user on a partner or family member’s credit card account, the account is added to their credit profile, and they can benefit from the primary account holder’s good credit habits. 

How Being an Authorized User Can Build Credit 

Becoming an authorized user may give a borrower’s credit a quick boost. If the primary cardholder uses their credit card responsibly, their positive behaviors can be reflected in the authorized user’s credit report as well. Here’s how this strategy can be beneficial. 

Decrease Credit Utilization 

Credit utilization ratio is the percentage of available credit a borrower is currently using, and it’s a key factor in credit scoring. Becoming an authorized user increases an individual’s available credit. If the primary cardholder keeps their utilization low, the authorized user can benefit from this as well. A lower credit utilization ratio may indicate responsible credit use and can contribute to a higher credit score over time.  

Increase Average Age of Accounts 

An individual’s length of credit history plays a crucial role in credit scores. Lenders want to see a long history of responsible credit use. Adding an authorized user to an old account may increase the average age of their credit history, potentially leading to a credit score increase. Becoming an authorized user is especially helpful to anyone with a thin credit file.  

Create or Extend a Payment History 

If the primary cardholder consistently makes payments in full and on time, those payments will appear on the authorized user’s credit report as well. This can help establish or continue a positive payment history, making it easier to qualify for credit in the future. 

What Are the Risks of Being an Authorized User? 

Though becoming an authorized user offers potential benefits, there are also risks worth considering. 

• Negative credit impact: Missed or late payments from the primary cardholder may reflect on the authorized user’s credit report, potentially lowering their score even more. 

• Lack of control: Since the authorized user is not responsible for making payments, they have little control over the account’s financial management. 

• Removal from the account: If the primary cardholder removes the authorized user from the account, the credit history associated with that account may disappear. 

Becoming an authorized user can be an advantage to people just starting out with credit. However, it’s important to work with a responsible primary cardholder and work out a plan on how to use and make payments on the shared card. 

Disclaimer: This content is sponsored by myFICO and is provided for informational purposes only. The information shared here is not intended to serve as financial, legal, or credit-related advice. Readers are encouraged to consult with their personal financial advisors or credit professionals to assess their specific situation. To learn more about myFICO’s services, including credit scores and monitoring tools, please visit the myFICO website or reach out to a myFICO representative. 

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