Will adding an authorized user help my credit?
Adding an authorized user to a credit card account can be a strategic move to improve your credit score, but it’s important to understand the nuances and potential benefits before making this decision. Here’s a closer look at how adding an authorized user can impact your credit and whether it’s a good option for you.
Understanding the Impact on Credit Score
When you add an authorized user to your credit card account, the primary cardholder’s credit history and payment behavior will be reflected on the authorized user’s credit report. This means that if the primary cardholder has a good credit history, with timely payments and a low credit utilization ratio, the authorized user may benefit from this positive association.
Positive Effects on Credit Score
1. Length of Credit History: Adding an authorized user can help the authorized user establish a longer credit history, which is a significant factor in credit scoring. If the authorized user doesn’t have a long credit history, this addition can positively influence their score.
2. Credit Mix: Having a mix of credit types, such as a credit card, can improve your credit score. If the authorized user doesn’t have a credit card, being added to one can diversify their credit mix.
3. Payment History: If the primary cardholder has a history of timely payments, this can positively impact the authorized user’s credit score. However, if the primary cardholder has missed payments, this could negatively affect the authorized user’s score.
4. Credit Utilization Ratio: If the primary cardholder maintains a low credit utilization ratio, the authorized user may benefit from this behavior. However, if the primary cardholder has a high credit utilization ratio, it could negatively impact the authorized user’s score.
Considerations Before Adding an Authorized User
Before adding an authorized user, consider the following:
1. Lender’s Policy: Not all credit card issuers report authorized user activity to the credit bureaus. Check with your credit card issuer to ensure that adding an authorized user will have a positive impact on their credit score.
2. Account Responsibility: Ensure that the authorized user understands the responsibilities associated with the credit card, including making payments on time and maintaining a low credit utilization ratio.
3. Credit Score Impact: If the authorized user has a poor credit history, adding them to your account could potentially lower your credit score. It’s essential to consider the overall impact on both parties’ credit scores.
4. Monitoring Credit Score: Keep an eye on your credit score after adding an authorized user to monitor any changes and ensure that the addition is having the desired effect.
Conclusion
In conclusion, adding an authorized user to your credit card account can help improve their credit score if the primary cardholder has a good credit history. However, it’s crucial to weigh the potential benefits against the risks and ensure that both parties are prepared for the responsibilities that come with the added account. Always check with your credit card issuer and consider the unique circumstances of your situation before making this decision.
