Authorized user accounts are a good and easy way to build or rebuild your credit, especially if you can’t or don’t want to get a credit card. This article will tell you everything you need to know about them.
How authorized user accounts work
In case you can’t or don’t want to get a credit card, you can ask one of your parents to add you to theirs. This means that your name will be added to the existing credit card account of another person. You become an authorized user, which is different from a co-signer or a joint cardholder. Once you activate your card, you will have the same buying power as the primary cardholder.
The benefits of authorized user accounts
The most important benefit that comes with being an authorized user is the fact that the history associated with the account will be added to your credit report after a few months. Additionally, you won’t be liable for the charges or balance on the account. So you don’t have to pay any money to cover the payments. This doesn’t mean, however, that you should go wild with the credit card. If you really want to have a good credit score, you need to act responsibly.
The best way to use authorized user accounts
If you want to become an authorized user in order to improve your credit score, you have to choose an old credit card account, with a low balance relative to the credit limit and that has always been paid on time. This will help you greatly improve your credit score.
Dropping your authorized user status
The downside of being an authorized user is that, if the primary cardholder does something irresponsible with the account, it will show up on your score. However, you can remove your name from the account. Afterwards, you can easily remove authorized user from your report as well.
You can’t be an authorized user forever, you can’t jump from one account to another. After a while, you will need to get your own account and become a primary cardholder yourself.