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Does Becoming an Authorized User Help Your Credit?


Whether you like it or not, credit is important and it’s here to stay.  Most of us know that you need good credit when applying for loans or apartments. But even employers are starting to check potential employee’s credit history these days.  If you’re stuck with bad credit, there usually isn’t a lot you can do to fix it quickly.  It takes time which is why it pays to open lines of credit early, always make your payments on time and use a low percentage of your available limits.

Related: What Credit Score Is Needed to Buy a House?

That could take years though, what can you do if you need to boost your credit score quickly?

There actually is a trick that you can use that credit card companies encourage.  If you’ve ever activated a new credit card, at the end of the representative’s spiel, they’ll often ask if there’s anyone you’d like to add as an authorized user.  Most people just gloss over this question and and forget about it. But this is where it pays to know just how a credit score works.

Basics of Credit

Every time you open a new credit card, your score will take a hit in the average age and inquiry departments.  Since you’re introducing a brand new card, this will lower the average age of all your cards. Issuers also don’t like to see too many inquiries on your report.  But your score will be buoyed by adding a new account and increasing your overall credit limit.  That usually isn’t enough to offset the bad though, which is why there is a 3-10 point drop every time you open a new card.

Related Article: Common Knowledge on Credit Scores

Authorized User Basics

Being added as an authorized user is just like applying for a new credit card but without the hard inquiry.  Some companies, like Amex have even been known to backdate your card to the original member’s ‘member since date’.  So in the past if you were added onto an account that was 10 years old, you would have actually gotten that same age.  This rarely happens anymore but the myth still lives on.  Amex’s official policy is that they no longer backdate but they are more than happy to accept authorized users.

As an authorized user, you will receive your own credit card that is linked to the main user’s account.  The authorized user can make purchases and payments but is not able to make any significant changes to the account.

Risks of Adding an Authorized User

One thing to keep in mind if you’re considering adding an authorized user to your account is that the main cardholder will be responsible for all charges.  If you have an authorized user that doesn’t pay his or her bills, you are now responsible and your credit is at risk.  In order to avoid this, you could add an authorized user but never give them the actual card.  They would still receive the credit benefits but you wouldn’t take on any of the risk.

Ultimately, if you’re looking to boost your credit or help a family member or friend increase their score, adding them as an authorized user makes a lot of sense.  You don’t even have to give them the card to help them out.  Just adding them will increase their number of accounts and total credit limit and in turn raise their credit score.

Update: We’re always getting reader questions about credit cards, but every situations is different. To make sure you get the information you need, we started our own matching service to help you find a financial advisor. Our SmartAdvisor tool can match you with as many as three financial advisors in your area in just a few minutes. All you have to do is answer about 20 questions about your financial situation. Then you can check out their profiles, interview them on the phone or in person and choose who to work with in the future.

Photo Credit: flickr