Building Credit as an Authorized User

Could you improve your credit by being added as an authorized user on someone else's account?

One of the questions that readers often ask me is whether or not building credit as an authorized user is an option for their finances. The good news is that, in some cases, it can be a good way to start establishing a solid credit history and score. However, you also shouldn't base your entire credit profile on being an authorized user — and you definitely need to avoid the shadier aspects of using this strategy.

building credit as an authorized user

How to Begin Building Credit as an Authorized User

If you want to build credit using the authorized user method, it works when you have a relationship with the person you plan to “piggyback.” You need to be a child or spouse or other close loved one in order to avoid being red-flagged when you use this method.

For parents who want to help a child build credit, adding him or her can be one way. This is especially true if the child is under 21. The Credit CARD Act of 2009 requires those under 21 without proof of income to have a cosigner. While you can cosign on your child's account to help him or her establish credit, you can also just add him or her as an authorized user in order to help you retain more control over the account.

This method also works well for stay at home partners who want to establish credit. One of the fastest ways to build credit is to be associated with credit cards. For someone who stays at home, it can be harder to get a separate credit card account. As a result, it can make sense to begin building credit as an authorized user.

In order to get started, add the new person to the account of someone who is already established. Realize, though, that you need to avoid the shady form of piggybacking. In the past, intermediaries offered you the chance to be added as an authorized user to a stranger's credit card. You wouldn't be able to do anything with it; you were just added to the account for credit building purposes. However,?agencies like FICO aren't stupid. They caught on and tweaked the algorithm. It's harder to build credit as an authorized user than it used to be, and if it isn't obvious that the authorized user is a close relation with you, there is a good chance it won't work.

Once you have been added (or added someone else) as an authorized user, it might take a few months for the situation to be acknowledged. After some time, though, the authorized user starts to benefit from the credit situation. This helps build the credit history, and can eventually lead to a situation where the authorized user transitions to his or her own accounts.

authorized user

What You Need to Know Before Adding an Authorized User

If you are trying to help a child or spouse build credit as an authorized user, you should be aware of some of the realities of the situation. The main thing to keep in mind is that you are completely responsible for the charges on the account. This is?not?a joint credit card account, in which both parties are equally liable for the charges. An authorized user isn't responsible for anything on the account, no matter who rings up the debt.

Before you add an authorized user, be aware of this. You should set some ground rules about the use of the account ahead of time, especially with your children. Make sure to review the charges, and if you feel like the authorized user is abusing his or her privileges, remove him or her from the account.

Transition from Being an Authorized User

After you have been building credit as an authorized user for a time, it's time to transition. You don't want your entire credit built up by being an authorized user. For someone without established credit, this method can be one way to start gaining a financial reputation. However, it shouldn't be the basis of your entire credit building plan.

As you are able to get credit in your own name, such as a credit card or small personal loan from the bank, you can slowly move away from the need to be an authorized user. At some point, it might even make sense to be removed from these accounts. Getting your own credit card, and being responsible for your own credit situation, without the need to rely on someone else, should be the ultimate goal.

4 thoughts on “Building Credit as an Authorized User”

  1. How early or young would you recommend adding a child as an authorized user? What would happen if you had someone as an authorized user and for some reason you had trouble with the credit card. Would it reflect poorly on the authorized user as well? Would that be a potential risk?

    1. Miranda Marquit

      Yeah, it is a risk to the authorized user if something happens and the primary account holder’s credit tanks. So that’s one good reason to move off if possible. As far as adding a child, I’d wait until he or she has shown responsible money habits. There’s no minimum age, although it makes sense to wait until at least age 16, in my own opinion. But if your teen isn’t ready for the responsibility, there’s nothing wrong with waiting until he or she is 18, 19 or 20.

  2. Abigail @ipickuppennies

    My husband had pretty bad credit. It seems to have increased lately, though, now that we’ve paid off his student loans and a few things have fallen off his report. That said, I’m guessing a large part is that he’s an authorized user on our credit cards.

    Honestly, I thought you couldn’t build credit like that anymore. Guess it’s a good thing I was wrong, eh?

    1. Miranda Marquit

      FICO took it away for a short period, but there was outcry by stay at home partners. So they tweaked how they do it. It’s nice that his credit is improving, though!

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