If you're thinking of signing up for an Authorized account, you might be wondering about the benefits these accounts could have on your credit score. Authorized users don't have to pay monthly payments because they aren't legally responsible for any balances on accounts they have been given permission to use. They can however build their credit history by using a creditcard for purchases.
Authorized users can purchase on their own
If a teenager or child is old enough, it's a good idea to add them as authorized users on a credit-card. This is a great way for them to learn about personal finance, borrowing responsibly, and how to manage their debt. These lessons are crucial for college students and young people. It can be a good idea to add students to your account, but it can also prove difficult.
An authorized user can make a big difference to your credit score. Credit utilization is a key factor in determining credit scores. For example, if you have a credit limit of $1,000, and you make $300 on your monthly statement, you're using 30% of your credit limit. Your overall utilization will be reduced by adding an authorized user.
They're not legally responsible for the balance
The cardholder's legal responsibility is not on the authorized user unless they make unauthorised purchases or charge items on the account that they aren't authorized. However, in some states, a spouse of an authorized user can be held liable for the debt if the cardholder dies. An authorized user can also be considered a joint account holder in some states that have community property. This means they are equally responsible for any account debts.
If the primary account holder isn't happy with an authorized user charging anything, they can have them removed. It's easy to make a call or submit an online request. Some card issuers restrict the ability to remove authorized users.
They don’t have to pay every month
It's possible to build credit by adding an authorized user on your credit card account. Authorized users benefit from the positive payment history of a primary account holder. If the primary cardholder is punctual in making all payments, authorized users should be able to see a positive credit history. Not all credit card issuers report authorized users to credit bureaus.
One option for you is to add a family member to your credit card. You can trust that this person will not use your credit card for unneeded purchases. You can keep your card as long you don't exceed the credit limit.
They can build a credit history
Be careful when you're considering being an authorized user for someone else's credit cards. This account can have its advantages but it's not a good idea to abuse it. You can improve your credit score if you use it responsibly.
You can increase your credit score by adding an authorized user to your card account. This will help you get more products at lower rates and access them. It can negatively impact your credit score if you make late or miss payments. You might want to apply for a secured credit line instead.