If you are thinking about signing up for an Authorized user account, you may be wondering how these accounts can improve your credit score. Authorized users can not be held legally responsible for the balance in the account that they have been authorized to access. They also don't need to make monthly payments. However, credit card purchases allow them to build up their credit score.
Authorized users make purchases on their own
When a child or teenager is old enough, it can be a great idea to add them as an authorized user on a credit card. This is an excellent way to teach children about responsible borrowing and personal finance. These lessons are important for young people, especially college students. While adding a student can be smart, it can also be complicated.
Your credit score can be affected if you add an authorized user. Credit utilization is a key factor in determining credit scores. You'd use 30% of your credit limit if you had a credit limit $1,000 and made $300 per month. The best way to reduce your overall utilization is to add an authorized user.
They're not legally responsible for the balance
A cardholder authorized user is not legally responsible for any balance on the card, unless they make unauthorized purchases and charge an item that the original cardholder hasn't authorized. If the cardholder passes away, however, a spouse can be held responsible for the debt in certain states. In community property states, the authorized user could also be a joint account owner and therefore equally responsible.
If the account holder doesn’t want authorized users to charge anything they can request that they be removed. It's usually as easy as calling the number or submitting an internet request. Some card issuers restrict the ability to remove authorized users.
They don’t need to pay monthly
An authorized user can be added to your credit card account and help you build credit. Authorized users can benefit from the excellent payment history of the primary account holder. If the primary cardholder is punctual in making all payments, authorized users should be able to see a positive credit history. Some credit card issuers may not report authorized user accounts.
You have the option to add a relative to your credit card. This person can be trusted not to use your card for unnecessary purchases. You can keep the card as long as the limit is not exceeded.
They can create a credit history
It is important to be responsible when using someone else's credit-card card. This account can have its advantages but it's not a good idea to abuse it. Your credit score will improve if you use it responsibly.
Your credit score can be improved by adding an authorized person to your credit cards account. This will increase your ability to get products at lower rates and improve your credit rating. It can negatively impact your credit score if you make late or miss payments. In this case, you may want to consider applying for a secured credit card instead.