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Can an Authorized Credit Card User Hurt Your Credit?

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These days, many consumers are quite aware of the role their credit score plays in their daily life, as it can affect everything from their credit qualifications to the interest rates and fees they face on various accounts in their name.

But one critical misstep many consumers make, particularly if they have kids in their teens or early 20s, is having authorized users on their credit cards. This is because regardless of who racks up the debt, and what their responsibility is to the cardholder for paying back the amount of money they add to the card’s balance, it is ultimately the cardholder that is held accountable for the debt.

For this reason, having an authorized user on their account can play havoc on a consumer’s credit rating. For instance, the other person with access to the card can rack up large amounts of debt that pushes the balance closer to the account’s limit, meaning that their credit utilization ratio — the second-largest factor in determining a person’s credit rating, totaling for 30 percent in all — will begin to count against them.

Of course, an authorized user who does not control their spending can also create the problem of driving a balance so high that the person in whose name the account was issued can no longer afford to make the minimum payments, or perhaps throw their finances out of order. Payment history — defined as the number of on-time payments a consumer makes into their various credit accounts — makes up 35 percent of a credit rating, the single largest factor in determining that score.

For this reason, it’s important for consumers to limit the number of authorized users they have on their credit card accounts, and have serious talks with those they do allow to share a card with them. If the other person knows their responsibilities to the cardholder and the ways in which they can seriously damage the person’s credit rating by misusing the account, they may be less likely to spend frivolously on the card. This type of talk can be especially beneficial for younger people because they may not know the full implications and responsibilities that come with properly managing a credit card account and maintaining a healthy credit score.

Image: rubenerd, via Flickr

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  • Les

    Does my FICO/credit score affect the authorized user’s credit score, and vice versa?

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