Does Closing an Authorized User Hurt Credit?

Being an authorized user on a credit card account means an individual can make purchases using the credit card, but they are not legally obligated to repay the debt. Many individuals use this method to help someone establish or improve their credit profile. This article explores how removing an authorized user can affect the credit scores of both the authorized user and the primary account holder.

How Authorized User Status Affects Credit

When an individual becomes an authorized user, the credit card account’s activity, including its payment history, credit utilization, and age, may appear on their credit report. This reporting depends on whether the credit card issuer sends authorized user data to the major credit bureaus. If the issuer reports this activity, the authorized user’s credit profile can be positively influenced by consistent on-time payments and low credit utilization on the primary account.

Conversely, if the primary account holder makes late payments or carries high balances, this negative activity can also be reflected on the authorized user’s credit report, harming their credit score. The financial habits of the primary account holder directly influence the authorized user’s credit standing.

The inclusion of the primary account’s history can significantly contribute to the authorized user’s credit age. A longer credit history contributes positively to credit scores. For new credit users, an authorized user account can provide years of payment history, boosting their scores.

Impact of Removal on the Authorized User’s Credit

Removing an authorized user can have varying effects on their credit score, depending on their overall credit profile and the specific reporting practices of the credit card issuer. When removed, the account may be marked as closed on the authorized user’s credit report or removed entirely. The impact is highly individualized.

A significant consequence is the loss of positive payment history associated with that account. If the authorized user relied on this account for a substantial portion of their positive credit history, its removal may diminish the overall strength of their credit report.

The authorized user’s credit utilization ratio can also change. Credit utilization measures the amount of available credit being used, and it is a significant factor in credit scoring. If the removed account contributed a large portion of the authorized user’s total available credit, its removal can increase their utilization ratio, lowering their score. For instance, if the removed account had a high credit limit and a low balance, its absence can raise the authorized user’s overall utilization percentage.

The average age of the authorized user’s accounts can decrease. If the removed account was one of their oldest or longest-standing credit relationships, its disappearance from their credit report may shorten their average account age. A shorter average account age can negatively affect credit scores.

Impact of Removal on the Primary Account Holder’s Credit

Removing an authorized user has no direct negative impact on the primary account holder’s credit score. The credit account remains open and active under the primary account holder’s name. Their personal payment history and credit utilization ratio continue to be reported as usual.

The primary account holder retains full responsibility for the account’s balance and all charges made, regardless of who made them. Removing an authorized user simply restricts their ability to make new purchases. In some situations, removing an authorized user may even indirectly benefit the primary account holder if the authorized user’s spending habits were contributing to high balances.

Common Reasons for Removing an Authorized User

Primary account holders often remove authorized users due to evolving personal circumstances or financial considerations. A common reason involves changes in relationships, such as a divorce or a young adult child becoming financially independent. In these situations, the need for shared access to a credit line diminishes.

Concerns about an authorized user’s spending habits or misuse of the card also frequently lead to removal. Since the primary account holder is solely responsible for all charges, excessive or irresponsible spending by an authorized user can create financial strain. Removing access becomes a protective measure to prevent further debt accumulation.

Another scenario involves the authorized user successfully establishing their own independent credit history. Once they have their own credit accounts and a solid financial footing, continuing as an authorized user may no longer be necessary or desired. The primary account holder may also wish to simplify their financial affairs by reducing the number of individuals linked to their accounts.