When it comes to building credit, one option that can be beneficial is becoming an authorized user on someone else’s credit account. Being an authorized user means that you have permission from the primary account holder to use their credit card. In this blog post, we’ll discuss what it means to be an authorized user and how it can help you build credit.
What is an Authorized User?
An authorized user is someone who has been granted permission by the primary account holder to use their credit account. This person can use the credit card or other credit account to make purchases, just like the primary account holder. However, the authorized user is not legally responsible for paying back any debt incurred on the account.
As an AU, you will have your own credit card that is linked to the primary account holder’s credit account. You can use this card to make purchases, and the charges will be added to the primary account holder’s balance. The primary account holder is responsible for making payments on the account. Any missed payments will affect both the primary account holder’s credit score and the authorized user’s credit score.
How Can This Help Build Credit?
Being an authorized user can be a useful tool for building credit. Here are some ways it can help:
- Establish Credit History: If you are just starting out and have no credit history, becoming an authorized user on someone else’s account can help you establish a credit history. The account will appear on your credit report and show that you have access to credit. This can help you build your credit score.
- Improve Credit Score: If the primary account holder has a good credit score, being an authorized user can help improve your credit score. The positive credit history associated with the account will reflect on your credit report. This can help boost your credit score.
- Build Credit Responsibly: Being an AU can help you learn how to use credit responsibly. You can see firsthand how the primary account holder uses credit and how they manage their debt. This can be a valuable lesson in financial responsibility.
- Access to Credit: As an AU, you have access to credit that you might not have been able to get on your own. This can be especially helpful if you need to make a large purchase, such as a car or home.
Things to Consider When Becoming an Authorized User
While being an AU can be a helpful way to build credit, there are things to consider before becoming one:
- Trust: You need to trust the primary account holder to manage the account responsibly. Any missed payments or other negative activity on the account can harm your credit score, so it’s important to make sure the primary account holder is responsible.
- Communication: It’s essential to communicate with the primary account holder and establish clear expectations about how the account will be used. You should also agree on how you will handle any debt that is incurred on the account.
- Liability: Remember that as an authorized user, you are not legally responsible for paying back any debt incurred on the account. However, if the primary account holder cannot pay back the debt, it can harm your credit score.
In conclusion being an AU can be a helpful tool for building credit. It can help you establish credit history and improve your credit score. You will also learn how to use credit responsibly, and provide access to credit. However, it’s important to consider the trustworthiness of the primary account holder, communicate clearly about expectations, and understand the potential liabilities involved. By doing so, you can use being an authorized user to build credit history and improve your credit score.
