If you are thinking about signing up for an Authorized user account, you may be wondering how these accounts can improve your credit score. Authorized users aren't legally responsible if the balance is not paid out monthly. However, credit card purchases allow them to build up their credit score.
Authorized users are able to make purchases on their behalf
When a child or teenager is old enough, it can be a great idea to add them as an authorized user on a credit card. This is a great opportunity to teach your child about responsible borrowing, personal finance, debt management, as well as how to manage your money. These lessons are vital for college students, and all young people. Although it is a smart move to add a student, it can be difficult.
An authorized user can make a big difference to your credit score. This is because credit usage is a significant factor in determining how high your credit score is. Consider this: If your credit limit is $1,000, but you make $300 every month, your credit utilization is 30%. Adding an authorized user to your account will help you lower your overall utilization.
They're not legally responsible for the balance
If an authorized user makes unauthorized purchases or charges items to the account that aren't authorized, they won't be legally responsible. However, in some states, a spouse of an authorized user can be held liable for the debt if the cardholder dies. An authorized user can also be considered a joint account holder in some states that have community property. This means they are equally responsible for any account debts.
They can also remove an authorized user from a primary account if they don't want them to be charged anything. It is usually as simple as calling or sending an email request. Some card issuers limit the ability of authorized users to be removed.
They don't need to make monthly payments
The good news is that adding an authorized user to your credit card account can help you build credit. Authorized users are able to take advantage of the good payment record of the primary account holder. The authorized user will see a positive credit score as long they make all their payments on-time. However, not all credit card issuers report authorized user accounts to the credit bureaus.
One option for you is to add a family member to your credit card. You can trust this person to not use the card to make unnecessary purchases. The credit limit can be maintained so long as the card is used only for legitimate purchases.
They can create a credit history
You should be cautious about using a credit card that you have been authorized to use. While this account does have some benefits, it is not wise to misuse it. Your credit score will improve if you use it responsibly.
You can increase your credit score by adding an authorized user to your card account. This will help you get more products at lower rates and access them. However, it can also negatively affect your credit if you miss or make late payments. You might want to apply for a secured credit line instead.