Does being an authorized user impact credit score?
In the world of credit, being an authorized user can have a significant impact on your credit score. This arrangement allows someone to access another person’s credit card account without having their own credit card. The question of whether this impacts the authorized user’s credit score is a common one, and the answer can be both yes and no, depending on various factors.
Understanding the Role of an Authorized User
An authorized user is someone who is allowed to use another person’s credit card but is not responsible for paying the bill. The primary cardholder, or the person who owns the account, is still responsible for the charges made by the authorized user. This arrangement is often used by parents for their children, or by individuals who want to help someone establish or rebuild their credit.
Impact on Credit Score
The impact of being an authorized user on your credit score can be positive, negative, or neutral, depending on several factors:
1. Credit Utilization: If the primary cardholder maintains a low credit utilization rate (i.e., the percentage of available credit they are using), this can positively affect the authorized user’s credit score. However, if the primary cardholder has a high credit utilization rate, it could negatively impact the authorized user’s score.
2. Payment History: The primary cardholder’s payment history will directly affect the authorized user’s score. If the primary cardholder consistently pays their bills on time, this will positively influence the authorized user’s score. Conversely, if there are late payments or defaults, this can negatively impact the authorized user’s score.
3. Length of Credit History: The longer the primary cardholder has had their credit card, the more positively it will affect the authorized user’s credit score. This is because a longer credit history can demonstrate financial responsibility.
4. New Credit: If the primary cardholder adds the authorized user to their account, it may be considered a new account, which could slightly lower the average age of the authorized user’s credit accounts. However, this impact is usually minimal.
Conclusion
In conclusion, being an authorized user can impact your credit score, but it’s not always a straightforward relationship. It’s important to understand the credit habits of the primary cardholder and how their actions will affect your credit score. If you’re considering becoming an authorized user, weigh the potential benefits against the risks and make an informed decision.
