Signing up for an Authorized User account may make you wonder how these accounts can improve credit scores. Authorized users do not have to pay monthly fees, and are not legally responsible to the balance of the account they have been granted permission to use. However, credit card purchases allow them to build up their credit score.
Authorized users are able to make purchases on their behalf
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 to teach them about personal finance, debt management, and responsible borrowing. These lessons are essential for young people, particularly college students. 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. 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 are not legally liable to the balance
An authorized user of a card isn’t legally responsible for the card’s balance unless they make unauthorized purchase or charge an item to the account that the original cardholder wasn’t authorized. However, in some states, a spouse of an authorized user can be held liable for the debt if the cardholder dies. Additionally, authorized users may also be joint account holders in communities property states and thus equally responsible for any debts.
If the primary account holder doesn't want an authorized user to charge anything, they can remove them. It is usually as simple as calling or sending an email request. Some card issuers restrict the ability to remove authorized users.
They don't have monthly payments
An authorized user can be added to your credit card account and help you build credit. Authorized users benefit from the positive payment history of a primary account holder. The authorized user can see positive credit history as long as the primary cardholder pays all their bills on time. However, credit card issuers do not always report authorized accounts to credit bureaus.
An option is to add your family member to the credit card. This person will not be able to use the card for any unrelated purchases. You can keep the card as long as the limit is not exceeded.
They can build a credit history
You should be cautious about using a credit card that you have been authorized to use. 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.
A credit card account that has an authorized user can help improve credit scores. This will lead to lower rates and better access to products. However, it can also negatively affect your credit if you miss or make late payments. Consider applying for a secure credit card in this instance.