Your credit score is determined by your past history with accounts in your name. This includes credit cards, mortgage loans, car loans, and any other debt you take on. Normally, you have to apply for credit and complete a credit check before you're granted access to loans.
However, there is also another way to gain access to credit and start building a credit history: You can become listed as an authorized user on someone else's credit card. Authorized-user status can either help your credit or hurt it depending on how responsible you and the account holder are with borrowed money. It's important to understand how this status works before you become an authorized user.
How do you become an authorized user?
A person becomes an authorized user when a primary account holder contacts a credit card provider and asks. The primary account holder must provide the name and birth date of the authorized user. Some cardholders will require a Social Security number; however, creditors use this information only to verify identity, not to run a credit check or confirmcredit-worthiness.
Once an authorized user is added to a credit card account, a card is issued in his or her name. The authorized user can make purchases on the card, but won't be legally responsible for paying the balance.
Authorized-user status provides access to credit for someone who has bad credit or no credit and thus couldn't qualify otherwise. There are usually no minimum age requirements. Parents could even add a young child to their credit cards.
How being an authorized user can help your credit
Once you're an authorized user, you might get credit for the responsible borrowing behavior of the primary cardholder. Not all creditors report authorized-user status to credit bureaus, but many do. The primary account holder should ask the credit provider if account information will appear on the authorized user's credit report.
If the account is listed on your credit report and treated as your own, the positive history associated with it could boost your credit score. The extent of the impact will depend on the rating agency. Some scoring agencies consider an account as if it were your own, others don't weigh the information as heavily, and still others ignore accounts entirely if you have only authorized-user status.
If you get credit for the account on which you're an authorized user, then your score could get a significant boost under the right circumstances. If the cardholder makes payments on time, these payments show up on your credit report. If there's a substantial amount of available credit on the open card, your report will show ample available credit. If the account has been open a long time, you get the benefit of your history suddenly becoming much longer. Payment history, available credit, and age of accounts are all important factors when credit scores are calculated.
When authorized-user status can hurt your credit
Your credit can be helped by authorized-user status if the primary account holder is responsible with credit. But the converse is also true: The bad credit of the primary cardholder could hurt your score.
Some credit scoring agencies only factor in positive data when scoring authorized users, but others consider both positive and negative information.
This means that if the primary account holder makes late payments, it could count against you. If the primary cardholder maxes out the credit account, your report will show a high utilization rate. Since you aren't responsible for making payments and don't get bills as an authorized user, you may not even know this is happening.
You're also at risk of a score drop if authorized-user status is boosting your score and the primary cardholder removes you. Because this is always a possibility, authorized-user status should be viewed, at best, as a short-term method of improving your credit score. Apply for your own card as soon as you can and use that card responsibly so you'll earn a high score on your own.
If you're hoping to become an authorized user to boost your credit score, make sure the person willing to add you to their account is very responsible with their borrowing behavior. Be aware of the risks if someone wants to add you to their account for any reason, whether because you're combining finances or you're becoming a caregiver. Don't put your credit at risk simply by being listed on someone else's credit card.