Does Adding an Authorized User Hurt My Credit?

An authorized user is an individual granted permission by a primary credit card account holder to make purchases using a card linked to that account. While an authorized user can use the card for transactions, they are not legally obligated to repay the debt incurred. This arrangement raises questions about its credit implications. This article aims to clarify how adding an authorized user can affect the credit of both the primary account holder and the authorized user.

How Authorized User Accounts Are Reported

Credit card companies generally report authorized user activity to the three major credit bureaus: Equifax, Experian, and TransUnion. This reporting includes details such as the account’s payment history, its credit limit, the current balance, and the age of the account. For instance, if the primary account has a long history of on-time payments, this information can be reflected in the authorized user’s credit file.

However, not all card issuers report authorized user information to all three bureaus, and some may have specific criteria for reporting. Policies can vary, with some issuers not reporting if the authorized user is under a certain age or if the primary account shows negative activity. The primary account holder remains solely responsible for all charges and timely payments.

Impact on the Primary Account Holder’s Credit

Adding an authorized user does not directly harm the primary account holder’s credit score. The primary cardholder’s credit standing is primarily affected by how the account is managed after the authorized user is added. If the account is managed responsibly, with on-time payments and low credit utilization, there is no negative impact.

However, the primary account holder assumes all financial risk for the authorized user’s spending. If an authorized user overspends, leading to a high credit utilization ratio, or if payments are missed, the primary account holder’s credit score can be significantly negatively affected. All account activity, regardless of who made the purchase, ultimately reflects on the primary account holder’s credit report.

Impact on the Authorized User’s Credit

Becoming an authorized user can serve as a beneficial tool for individuals looking to build or improve their credit history, particularly those with limited credit experience. If the primary account holder maintains responsible credit habits, such as consistent on-time payments and low credit utilization, this positive history can appear on the authorized user’s credit report. This can boost their credit score and enhance their credit profile.

Conversely, if the primary account holder mismanages the account through missed payments or high balances, this negative activity will also be reflected on the authorized user’s credit report. This can damage the authorized user’s credit score. While an authorized user can be removed from an account to cease future reporting, past negative history can continue to impact their credit.

Key Considerations When Adding an Authorized User

Before adding an authorized user, careful consideration and clear communication are important. Establishing trust between the primary account holder and the authorized user is important due to financial responsibility. Discuss spending limits and payment expectations beforehand to prevent misunderstandings or overspending.

Primary account holders should regularly monitor account activity to promptly identify and address any unexpected issues. Many card issuers offer online tools or mobile apps that allow for tracking purchases and setting up alerts for specific transaction amounts. Aligning the decision to add an authorized user with the credit goals of both parties is also important. For individuals seeking to build credit, alternative options like secured credit cards or credit-builder loans can also be considered.