If you’re considering adding someone to your credit card accounts — a spouse, child, parent or even close friend — you might be wondering how it could impact your credit, both positively and negatively.
The simple answer is that it won’t really. As long as you’re making your payments on time and neither of you run up a lot of debt, you should see no affect on your credit reports whatsoever. In fact, the authorized user won’t show on your credit reports at all.
In a nutshell, an authorized user is simply someone who holds a card from your account in his or her name, but is not a primary or joint account holder. They can make purchases, but they have no obligation to make payments. And unlike a primary or joint account holder, an authorized user can’t do anything more than use the card to spend money. They can’t report a card lost or stolen, close an account or add other authorized users.
That said, the account they are authorized to use will show up on their credit reports (as long as the creditor is reporting the account to the credit bureaus), and that can be helpful if you’re trying to help a friend or loved one establish or improve their credit.
Some of the other reasons you might want to add an authorized user to your accounts are:
Your Own Convenience
If you are frequently asking someone to make purchases for you, it could be a good idea to make them an authorized user. It’s a simple way to keep track of spending and can help you avoid the hassle of giving them cash before the purchase or reimbursing them after a purchase is made.
Build Rewards Faster
If you’re both spending money on your rewards card, you’re likely going to be racking up points even faster. Some cards even offer bonuses for adding authorized users.
The Possible Cons
Their Debt Is Yours
Whether or not all their purchases are made with your permission, you’re the one who is solely responsible for repayment, so only give a card to someone you trust. If you want to help someone build their credit, for example, but you aren’t sure you can fully trust them not to put you into debt if you give them a card, you could still make them an authorized user, but not give them the card. In this way, your good credit becomes theirs, but you avoid the possibility of having their bad credit habits hurting you.
Your Payment History Is Theirs
Likewise, if you make late payments, miss payments or stop making your payments altogether, or if you end up maxing out your credit card, that will be reflected on the authorized user’s credit reports. Also, if you remove them from the account later, their credit score could take a small hit (that’s because it will lower their overall credit card limits, and that will increase their credit utilization). So before adding them, make sure you’re up to the responsibility of ensuring their credit will be well cared for.
Before you make any changes to your credit accounts, whether getting a new credit card, adding an authorized user, or even closing a credit account, it’s a good idea to check your credit scores to know where you stand and how your move might impact your scores. You can see two of your credit scores for free, updated every 14 days, on Credit.com.