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Informational
March 11,2023
By: Darrin Singer Jr
When it comes to credit, having a good credit score is essential for many things, from applying for a loan to getting approved for an apartment rental. If you are someone who is looking to improve your credit score, one strategy to consider is becoming an authorized user on someone else's credit card account. But what does it mean to be an authorized user? How can it benefit your credit score? And what are the potential risks involved? In this article, we will answer all these questions and more, providing you with everything you need to know about becoming an authorized user and how it can improve your credit score. Whether you are new to credit or looking for ways to improve your credit history, this article will provide you with valuable insights and tips on how to become a responsible authorized user and make the most of this credit-building strategy.
What is an Authorized User?
An authorized user is someone who has been added to a credit card account as a user by the primary cardholder. As an authorized user, you are given a card with your name on it, which can be used to make purchases. However, you are not responsible for making payments on the account, and you do not have the ability to make changes to the account, such as changing the billing address or requesting a credit limit increase.
Benefits of Becoming an Authorized User
Increased Credit Score
One of the primary benefits of becoming an authorized user is the potential to increase your credit score. When you are added as an authorized user, the credit card company reports the account activity to the credit bureaus in your name, which can help build a positive credit history. If the primary cardholder has a good credit score and makes payments on time, this can reflect positively on your credit report and boost your credit score.
Improved Credit History
In addition to improving your credit score, becoming an authorized user can also help improve your credit history. By being added to an account with a long and positive credit history, you can benefit from the positive account activity and potentially improve your credit report.
Access to Credit
If you are new to credit or have a limited credit history, becoming an authorized user can give you access to credit without having to apply for a credit card on your own. This can be particularly beneficial if you are trying to build credit and establish a credit history.
Risks of Becoming an Authorized User
Financial Responsibility
While becoming an authorized user does not make you responsible for paying the credit card bill, it is important to remember that the primary cardholder is. If the primary cardholder is unable to make payments, it can negatively impact your credit score and financial standing.
Negative Impact on Credit Score
While becoming an authorized user can potentially boost your credit score, it can also have a negative impact if the primary cardholder has a poor credit history or makes late payments. In these cases, the negative activity will also be reported on your credit report and can negatively impact yourcredit score.
High utilization affects your credit score
If the primary cardholder uses a high percentage of their credit limit, it can negatively impact your credit score. High credit utilization can make you appear riskier to lenders, and it can hurt your chances of qualifying for credit in the future.
Joint liability for debt
As an authorized user, you are not responsible for paying the bills. However, you are still responsible for any debt incurred on the account. If the primary cardholder cannot pay the bills, you may be held liable for the debt.
How to Become an Authorized User
If you are interested in becoming an authorized user, here are the steps you need to follow:
Find a Willing Primary Cardholder
The first step is to find someone who is willing to add you as an authorized user to their credit card account. This is typically a family member or close friend who trusts you and is willing to take on the financial responsibility of adding you to their account.
Request to Be Added as an Authorized User
Once you have found a willing primary cardholder, you will need to ask them to add you as an authorized user to their account. They will need to contact their credit card company and provide your name and other personal information to add you to their account.
Receive and Activate Your Card
Once you have been added as an authorized user, the credit card company will send you a card with your name on it. You will need to activate the card and set up any necessary login information to access the account online.
Tips for Being a Responsible Authorized User
If you decide to become an authorized user, it is important to be responsible with your use of the card. Here are some tips to help you be a responsible authorized user:
Communicate with the Primary Cardholder
Make sure you communicate with the primary cardholder and understand their expectations for your use of the card. It is important to be clear about how much you can spend and how often you should make payments.
Limit Your Spending
As an authorized user, you should only use the card for purchases that you can afford to pay for. It is important to avoid overspending and accumulating debt that you cannot repay.
Make Payments on Time
Even though you are not responsible for paying the credit card bill, it is important to make payments on time to avoid negatively impacting your credit score. If you cannot make a payment on time, communicate with the primary cardholder as soon as possible to avoid any negative consequences.
Monitor Your Credit Report
Keep an eye on your credit report to make sure that the credit card activity is being reported accurately. If you notice any errors or discrepancies, contact the credit card company and the credit bureaus to have them corrected.
Conclusion
Becoming an authorized user can be a helpful way to improve your credit score and build a positive credit history. However, it is important to be responsible and understand the potential risks before agreeing to become an authorized user. By following the tips outlined in this article, you can make the most of the benefits of being an authorized user while avoiding any negative consequences.
FAQs
Q: Will becoming an authorized user affect my credit score?
A: Yes, becoming an authorized user can potentially increase your credit score if the primary cardholder has a positive credit history and makes payments on time.
Q: Can I remove myself as an authorized user from an account?
A: Yes, you can ask the primary cardholder to remove you as an authorized user at any time.
Q: Will being an authorized user affect the primary cardholder's credit score?
A: Your activity as an authorized user will be reported on the primary cardholder's credit report, which can impact their credit score positively or negatively.
Q: Can I apply for a credit card as an authorized user?
A: No, being an authorized user does not give you the ability to apply for a credit card or take out a loan in your name.
Q: Do I need to have a credit check to become an authorized user?
A: No, you do not need to undergo a credit check to become an authorized user.
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