If I Add Someone to My Credit Card Will It Hurt My Credit?

Adding someone to a credit card can affect credit scores for both the primary cardholder and the person added. An authorized user receives permission from the primary cardholder to use their credit card account. This arrangement allows the authorized user to make purchases using a card linked to the primary account, but they are not legally responsible for the debt incurred. The primary cardholder remains solely accountable for all charges and payments.

Credit Impact for the Primary Cardholder

Adding an authorized user can indirectly influence the primary cardholder’s credit score through the authorized user’s spending habits. While the act of adding an authorized user itself does not directly impact the primary cardholder’s credit, the subsequent account activity can. If the authorized user manages their spending responsibly, leading to timely payments and low credit utilization on the account, this can reflect positively on the primary cardholder’s credit history.

Conversely, irresponsible use by an authorized user can negatively affect the primary cardholder’s credit score. Late payments, high balances, or exceeding the credit limit caused by an authorized user’s spending will directly impact the primary cardholder. All account activity, whether positive or negative, is reported under the primary cardholder’s credit history.

Credit Impact for the Authorized User

Becoming an authorized user can serve as a tool for building or improving a credit score, particularly for individuals with limited credit history. When the primary cardholder maintains a positive payment history and low credit utilization, this beneficial account activity often appears on the authorized user’s credit report. This can help the authorized user establish a credit history and potentially boost their credit score.

However, negative activity on the shared account, such as missed payments or high balances, will also be reported on the authorized user’s credit report. This can harm the authorized user’s credit score, even though they are not legally responsible for the debt. The age of the account and the credit limit associated with the primary card can also contribute to the authorized user’s credit profile, provided the card issuer reports authorized user activity to credit bureaus.

Key Factors Determining Credit Impact

Several credit scoring factors are influenced when an authorized user is added, affecting both the primary cardholder and the authorized user. Credit utilization, which is the ratio of the outstanding balance to the total credit limit, significantly impacts both parties’ scores. If the authorized user’s spending causes the account’s utilization to rise, it can negatively affect the credit scores of both the primary cardholder and the authorized user. Maintaining a low utilization rate, below 30%, is beneficial.

Payment history is another important factor, as any missed or late payments on the account will appear on both the primary cardholder’s and the authorized user’s credit reports. Payment history is a primary component of credit scores, so consistent on-time payments are important for both individuals. The average age of accounts can also be affected; while adding an older, well-maintained account can be advantageous for the authorized user, a new account might slightly lower the overall average age of accounts for the primary cardholder. The credit mix, which considers various types of credit, might see a minimal effect if the authorized user is just starting to build their credit history.

Understanding Different Account Types

It is important to distinguish between an authorized user account and a joint account due to their differing legal and credit reporting implications. An authorized user is granted permission to use a credit card, but they hold no legal responsibility for the debt incurred on that account.

In contrast, a joint account holder shares equal legal responsibility for the debt with the other account holder. Both individuals are fully liable for the entire balance on a joint account. This distinction is important for credit reporting: for authorized users, account activity is reported to credit bureaus, but the debt liability is not shared with them. For joint account holders, both the account activity and the legal debt liability are fully shared and reported on both credit reports.

Practical Considerations for Adding an Authorized User

When considering adding an authorized user, proactive steps can help ensure the arrangement is beneficial or at least neutral for credit. It is advisable to have open discussions about financial expectations and responsibilities, including who will pay for purchases made by the authorized user. Setting clear spending limits for the authorized user can help prevent overspending and potential negative impacts on credit utilization.

The primary cardholder should regularly monitor account activity, reviewing statements for any unauthorized or excessive spending. This oversight helps maintain control over the account and ensures responsible use. For the authorized user, understanding that the primary cardholder controls the account and can remove them at any time is important.