Why Being an Authorized User May Not Help You Get Credit

Quick Answer

A good credit score that is based on being an authorized user may not get you an approval when you need it, even when you have a good income. Creditors want to see how you pay when you are responsible for the debt.

Womaan holding a credit card and looking at it scrutinously.

Being an authorized user on a credit card can help get you on the credit radar and may even help give you an impressive credit score—but it may not be enough for you to qualify for credit in your own name. That's because being an authorized user does not obligate you to pay, and creditors prefer to see some evidence that you repay your debts as well as an income that will support repayment.

How Being an Authorized User Affects Your Credit

If you've never had a credit account of your own, such as a credit card or loan, being an authorized user can jump-start your credit history. When a parent or loved one adds you as an authorized user on their credit card account, the card issuer will typically report payments to the credit bureaus, resulting in a credit report and, eventually, a credit score. If the primary user of the credit card has a long history of on-time payments, low credit card utilization and high credit limits, you might even have an excellent credit score.

Some credit cards allow primary users to set spending limits for authorized users, potentially offering a training ground for authorized users to learn to use credit responsibly. However, because authorized users are not responsible for paying the credit card bill, even if they have faithfully repaid the primary user, those payments won't show up on their credit report and contribute to their own payment history.

If you already have some credit history, becoming an authorized user is likely to help your credit less, but it can still have a significant impact.

For example, say you have low credit limits, but high utilization—say, around 30% on a total credit card limit of $10,000. A relative offers to add you as an authorized user to her lightly used card, which has a $30,000 limit. Now your $3,000 balance is added to her small—let's say $500—balance. Together, the cards have a balance of $3,500, but a credit limit of $40,000. That makes for a much lower credit utilization—8.75% in this case—which can help a credit score.

How to Build Credit

A good credit score from being an authorized user is a great head start, but it's insufficient to demonstrate that you are a good credit risk. However, there are ways you can build credit and use that authorized-user status to help you progress even faster. The key with all of these is to make sure the lender reports payments to the credit bureaus and to make all your payments on time.

Get a Secured Credit Card

A secured credit card requires a refundable security deposit upfront. The deposit is typically equal to your credit limit. A secured credit card can be used like a traditional unsecured credit card, with payments reported to credit bureaus. A history of on-time payments can help you build credit. Some secured credit cards raise your credit limit, becoming partially secured credit cards, after a certain number of payments, and finally "graduate" to an unsecured credit card. Secured cards are meant to be temporary, until you can qualify for an unsecured card.

Take Out a Credit-Builder Loan

A credit-builder loan works the opposite of a traditional installment loan: You pay it off and get the money at the end of the loan term. The money is placed in a savings account while you make the payments, which are reported to the credit bureaus. It's smart to choose one with small payments that you can easily afford—the on-time payments are more important than the amount.

Apply for a Store Credit Card

Store credit cards are potentially easier to get than some other credit cards, but they tend to carry higher interest rates and have lower credit limits than other cards. Still, if your goal is to build credit, a store card that reports to credit bureaus may help you build credit.

Take Out a Secured Loan, Such as a Car Loan

You may be able to qualify for a loan secured by collateral, such as a car loan. Your on-time payments can help build your credit and will demonstrate your ability to repay money that you borrow.

Credit scoring models tend to reward consumers for having both revolving credit (reusable credit, like credit cards) and installment loans (with a set number of equal monthly payments).

Other Financial Habits to Build

In addition to being responsible with an authorized-user card, you can set yourself up for success when you are responsible for making payments. You're much more likely to be able to pay on time, every time if you:

  • Create and stick to a budget. It's easier said than done, of course, but knowing how many dollars you have coming in and where they are going can help you ensure that your actions and purchases line up with your values and that you have enough set aside to get you through an emergency.
  • Keep track of your finances. You can keep credit card balances from surprising you by checking balances online and setting up alerts to remind you if you're nearing a threshold you set.
  • Sign up for Experian Boost®ø. Experian Boost gives you credit for on-time utility, telecom, rent and certain streaming service payments, potentially boosting your credit scores.
  • Check your credit reports. You'll want to be sure that your accounts and on-time payments are being reported as agreed. Seeing the relationship between how you use credit and how your scores change can be useful as well. You can get your Experian credit report for free to chart your progress.

The Bottom Line

Being an authorized user can help you build credit—increasing your credit age, overall credit limit and history of on-time payments—but creditors will also want to see that you're up to the task of repaying the money you borrow. Since authorized users are not responsible for payment, you'll need to find other ways to do this.

You can bulk up your credit portfolio with a credit-builder loan, secured credit card, secured loan or other credit product that is reported to the credit bureaus. And you can get a free credit score and report from Experian. The information updates every 30 days, so you can see your progress over time.