What is an Authorized User?
An authorized user is someone who has permission to make purchases using your credit card account but is not legally responsible for paying the debt. Adding someone as an authorized user to your account can help them establish a credit history and improve their credit history. But, if they abuse that privilege, as the primary account holder, you will be stuck holding the bill.
Before allowing someone to become an authorized user on one of your accounts, be sure they understand their responsibility and be certain you are sure they will use the account responsibly.
How Does Being an Authorized User Help Their Credit?
When you add someone as an authorized user on your credit card, that account could be included in their credit report. Any account that is listed on their credit report will factor into their credit scores.
As long as that account is being paid on-time and the balance is kept low, it will likely have a positive effect on their credit history. If you have used the account responsibly over time, those habits will reflect on their credit report and may help to improve their credit scores.
If the account becomes delinquent, Experian will remove the account from their credit report. That individual will lose the account history, but will avoid having a negative credit reference in their report.
It's a fairly safe way to help young adult children, friends or family members establish their credit history. Making someone an authorized user can also be a great tool to teach them how to manage credit wisely. You don't necessarily have to give them a card, which allows you to keep some control over the account. Parents can use the experience to show their children how credit works:
- explain budgeting
- go to the store,
- allow a child to make purchases with the parent's supervision
- discuss the billing statement at the end of the month
Be cautious any time you are considering adding an authorized user. It's up to you to make sure the bill gets paid on time, regardless of the charges the authorized user makes.
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Do You Have Questions About Credit?
Join our live video chat every Tuesday and Thursday at 2:30 p.m. ET on Periscope. Rod Griffin, Director of Consumer Education and Awareness at Experian, is available to answer your questions live.
Scoped on: 5/02/2019
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