Can an Authorized User Hurt My Credit?
Understand how being an authorized user on a credit card can unexpectedly impact your credit score and what steps you can take to protect it.
Being an authorized user on a credit card can offer a pathway to establishing or improving credit history. An authorized user is an individual granted permission by the primary cardholder to use their credit card account. This arrangement can be particularly helpful for family members, such as younger individuals, who are just beginning to build their financial standing or for those seeking to rebuild credit.
How Authorized User Accounts Appear on Credit Reports
Authorized user accounts appear on the authorized user’s credit report. This reporting includes the full history of the account, detailing elements such as payment history, the credit limit, the current balance, and the age of the account. Credit scoring models, including FICO and VantageScore, consider this information when calculating an individual’s credit score.
While an authorized user can make purchases using the card, they are not legally responsible for the debt incurred on the account. The primary cardholder retains sole responsibility for making payments and managing the account. The presence of an authorized user account on a credit report adds a “tradeline,” which is any credit account appearing on a credit report. This tradeline reflects the primary account’s activity, meaning its positive or negative history can influence the authorized user’s credit profile. Most credit card issuers report authorized user account activity to the major credit bureaus.
Specific Account Behaviors That Can Harm Your Credit
The actions of the primary account holder directly influence the authorized user’s credit report, and certain behaviors can lead to negative impacts. One significant factor is high credit utilization, which refers to the amount of credit used compared to the total available credit limit. If the primary account holder maintains a high balance relative to their credit limit, this high utilization ratio will be reported and can lower the authorized user’s credit score. Generally, keeping credit utilization below 30% is considered beneficial for credit scores, as ratios above this threshold can signal increased risk to lenders. For instance, utilization exceeding 50% can lead to significant drops in a credit score.
Late payments by the primary account holder also pose a serious risk to an authorized user’s credit history. If the primary cardholder misses payments, these delinquencies can be reported to credit bureaus and reflect on the authorized user’s credit report. Even though the authorized user is not legally obligated to pay the debt, a primary account holder’s late payments can severely damage the authorized user’s credit score. Payment history is a primary factor in credit scoring models, making timely payments crucial for maintaining a positive credit profile.
Account closure, especially due to serious delinquency, can negatively impact an authorized user. If the primary account is closed because of a charge-off or a history of missed payments, this negative event may remain on the authorized user’s credit report for an extended period, typically up to seven years from the date of the last missed payment. This can affect the authorized user’s credit utilization if they still carry balances on other cards, as the total available credit decreases.
The age of the primary account can also influence the authorized user’s average age of accounts, a factor in credit scoring. While an older, well-managed account can positively contribute to the authorized user’s credit age, a relatively new account might not significantly boost this metric. If an old, well-established account that was beneficial to the authorized user’s credit gets closed or removed, it could potentially shorten their average account age and negatively impact their score.
Actions to Mitigate Negative Impacts
Monitoring your credit report regularly is a primary step an authorized user can take to manage potential negative impacts. Individuals can access their credit reports from the three major nationwide credit reporting agencies, Equifax, Experian, and TransUnion, annually at no cost through AnnualCreditReport.com. Reviewing these reports allows an authorized user to see how the account is being reported, including balances and payment history, and to identify any concerning activity.
Maintaining open communication with the primary cardholder is another important action. Discussing account management, particularly regarding credit utilization and timely payments, can help ensure responsible use that benefits both parties. This proactive approach can help prevent issues such as high balances or missed payments from negatively affecting the authorized user’s credit.
If concerns arise, an authorized user can request removal from the account. This can often be done by asking the primary cardholder to contact the credit card issuer, or in many cases, the authorized user can directly contact the issuer themselves to be removed. Once removed, the account may eventually cease to appear on the authorized user’s credit report, or its influence on their score will diminish over time.
Disputing inaccurate information on a credit report is a crucial right for authorized users. If an authorized user discovers incorrect data related to the account, such as reported late payments for which they are not responsible, they can dispute this information with the credit bureaus. This process typically involves contacting the credit bureau directly, providing details of the inaccuracy, and requesting its removal.