While it’s certainly not a substitute for building up your own credit history, being an authorized user can be a good way to give your credit a boost if you have little or no credit history.
 
Here’s what you need to know about an authorized user:
 
What exactly is an authorized user?
 
Being an authorized user means you can use someone else’s credit card in your name. You can make purchases and use the card as if it were your own, but you’re not the primary account holder.
 
As an authorized user, you’re not legally responsible to pay the credit card bill or any of the debts, as this is the responsibility of the primary account holder.
 
What effect does this have on your credit?
 
If the credit card provider reports authorized users to the three major credit bureaus (TransUnion, Experian, Equifax) then the primary account holder’s strong payment history (on-time payments) can have a positive effect on your credit. In addition, if the account holder has a low utilization rate on this card, that too could be a positive for you.
 
On the other hand, if the primary account holder misses’ payments and has a high utilization rate, then this can be a negative for you. Before you make this decision, be sure there is a potential upside as putting yourself on the wrong person’s account could have a detrimental impact on your scores.
 
Being an authorized user might not increase your chances of getting approved for credit cards and loans in the future, as lenders checking your credit history will want to see that you’ve managed your own credit accounts responsibly. However, in the right situation you can start building a credit history all while having the convenience of a credit card in your wallet.
 
If you have any questions or would like to schedule a free consultation, click here.
 

-Erik Kaplan

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