Tips For Building Good Credit
Becoming an authorized user is just one way to raise your credit score. Other strategies for building good credit include:
- Making on-time payments: Late or missed payments are one of the biggest factors that negatively affect your score, so its important to make on-time payments each month to build good credit.
- Reduce your credit utilization: Your , or the percentage of total credit youre using, also has a big impact on your score. Try to keep balances to a minimum and pay down debt when possible.
- Keep old accounts open: If you have old credit cards that you no longer use, you should consider keeping them open, since the age of your accounts can affect your score.
- Consider a secured card: If youre just starting out or are rebuilding your credit after tough financial times, a secured credit card is a good way to start building up your score. Secured cards require an initial deposit, and are easier to qualify for than traditional credit cards.
- Try Experian Boost: Utility bills paid by check or debit card arent usually included as part of your credit score. But if you pay your bills on time each month, you can add them to your credit report using Experian Boost.
- Be patient: Building up your credit score takes time. Even if youre making all the right financial moves, you may not see immediate results. Be patient, and eventually your score will reflect all of your hard work.
Advantages Of Adding Kids As Authorized Users
Adding a child as an authorized user on your credit card can help those with limited or no credit history start building a credit file. This allows them to get better credit offers once they are older. When you add a child as an authorized user, it reports as a new account on your childs credit report and the account history and details will impact their report.
So if you are a responsible credit card user with a strong payment history and low credit utilization rate, that will help your childs credit score. TPG contributor Ethan Steinberg started his credit cards journey as an authorized user on his fathers United Explorer Card.
Having a card in their own name also helps them learn to manage expenses while still under your protection, establishing healthy financial habits early.
Of course, there are also benefits for you. Every dollar your authorized user spends gives you the same miles and points as if you were the one doing the spending. Some banks allow authorized users to spend the points, too. For example, Chase Ultimate Rewards points can be transferred into the loyalty accounts of one authorized user who is a household member . However, you are limited to one person who meets that criteria, so dont use the functionality for a child if youd prefer to transfer those points to a spouse.
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For The Authorized User
Most report an authorized users credit activity to the three major credit bureaus in the U.S. . Positive account activity like on-time payments and low credit utilization will benefit an authorized users credit, as long as its reported. If its not, its not possible for an authorized user to reap the benefits of the primary cardholders good credit standing. Its always good practice to double-check with the card issuer: Call the number on the back of the card or read terms on the website.
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Why An Authorized Users Activity May Not Be Reported
There are some cases when the primary cardholders activity wont be reported to the authorized users credit report. Here are a few reasons why that might happen:
- Card issuer doesnt report authorized users. Some card issuers wont report your credit activity to credit bureaus, so make sure you avoid them if youre looking to build your credit.
- Age restriction. If the authorized user is younger than the minimum requirement, card activity isnt reported.
- Not the same address. Some authorized users report that their activity wasnt reported because they had a different address than the primary cardholder. This isnt the case with every credit card issuer, so ask about its policies.
- Social Security number missing. The authorized user needs to provide their SSN. Otherwise, your card activity may not reach the credit bureaus.
- Not all credit card issuers report your card activity to all credit bureaus sometimes only one or two.
How Do Credit Card Companies Report Authorized Users
Most travel credit card companies report to the Equifax, Experian, and TransUnion credit bureaus that you are an authorized user. However, some only report to two of the bureaus.
The national credit card issuers that report authorized users to at least one bureau include:
- American Express
- US Bank
- Wells Fargo*
Note: Reader feedback form April 2021 indicates that Wells Fargo may no longer report authorized users.
Regional banks and credits unions may be less likely to report authorized user tradelines on the credit report. Store charge cards reporting can also vary as it depends on the bank. If you are looking at a card from a mid-size or small bank, you should contact that bank before applying.
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How To Remove An Authorized User
You can usually remove an authorized user online or over the phone. Once you complete the process, its a good idea to send your credit card issuer a certified letter confirming the agreement to remove the authorized user from your account. You should also collect the credit card from the authorized user to ensure they can no longer make charges against your credit account.
Check Your Credit Reports
If you’re lucky, once you’re removed as an authorized card user, the credit bureaus will take the entire account history off your report. At the least, new information from the account should stop showing up. But check your reports to keep tabs on what the bureaus do. Through April 2022, you can get your credit reports free once per week via annualcreditreport.com.
Credit report mistakes are common — around a third of people found mistakes in recent months — so stay on top of things by following up in a month or two to see that the account is really gone. If it isn’t, here’s what to do.
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Can Being Added As An Authorized User Help Someone Build Credit
Being an on an account can help a person start building their credit history, but only if the credit card company reports the authorized-user account to the national credit reporting companies.
An authorized user can make purchases using the account but isn’t responsible for repaying the debt. Because of this, not all credit card companies choose to report their accounts to the authorized user’s credit history.
If you want to add someone as an authorized user to your credit card to help them build their credit history, you should first contact your lender to make sure they report authorized-user accounts to the three major credit reporting agencies. If so, your positive payment history can help your friend or family member get started with credit. Keep in mind that credit scoring models may not weigh an authorized-user account as heavily as an individual or joint account where the cardholder is responsible for the debt.
Being An Authorized User Could Hurt Your Credit
There are a few situations where piggybacking on a loved ones credit card account might hurt you. Your credit score could be in trouble if the primary cardholder:
- Pays the bill 30 days late or worse
- Runs up a big balance relative to the credit limit on the account
- Receives a credit limit decrease from the card issuer
Note: Experian states that it does not include negative payment history on the credit reports of authorized users. So, your Experian-based credit score might be fine even if the primary account holder pays late. Equifax and TransUnion, however, both warn that negative payment history on authorized user accounts could hurt both you and the primary account holder.
Remember, as an authorized user youre not legally liable for the debt. So, if the primary account holder pays late or runs up a big balance relative to his or her credit limit, you have the option to be removed from the account. A phone call or online request to the credit card issuer is often all it takes to remove yourself from an account. Some card issuers, however, only allow the primary account holder to make this request.
Once youre no longer an authorized user, the credit card company should ask the credit bureaus to delete the account from your credit reports. However, if the account continues to show up on your reports after youre removed from it, you can also dispute the mistake with the credit bureaus on your end.
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How Being An Authorized User Affects Your Credit
Being an authorized user on someone elses account could affect your credit. And although theres a solid chance your credit rating could benefit from becoming an authorized user, whether it ultimately does or doesnt is largely out of your control.
Below are three ways being an authorized user might impact your credit.
When To Use Authorized User
Some scenarios in which use of an authorized user scenario may be helpful:
- Someone in your household has poor credit and is unable to obtain a card on their own
- A young adult in the household needs help developing credit history
- A teenager in the household needs access to funds for nominal or emergency purchases
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How To Choose A Tradeline
There are two categories to choose from. Both will affect the cost of buying a Tradeline:
- The maximum amount of money someone can charge on their credit card.
- Length of credit history: How long the credit card account has been opened.
They both have positive effects on credit scores. However, choosing the best tradeline for you will depend on two key factors:
There are two types of consumers that consider purchasing a Tradeline. They may have different requirements.
Only Positive History Reported
Some banks only report payment activity when the card account is in good standing but not when the card is delinquent. Although most banks report both positive and negative credit events. You will want to monitor your credit score monthly to avoid unnecessary score drops.
One bank that might not report activity when the primary account is delinquent is US Bank.
Credit bureaus may also choose not to report negative credit card information. Experian states they dont report negative payment history. Various online sources indicate that Equifax and TransUnion report positive and negative payment history.
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Whats The Difference Between Authorized Users Co
So what about account co-signers and joint accounts? Here are some more details about how they work:
- Co-signer: A co-signer vouches for someone whoâs applying for their own credit card. The co-signer is telling the credit card company that if the cardholder canât pay, they will. Typically, co-signers donât get a card of their own, donât receive monthly statements and donât have access to the credit card account. And not all issuers allow co-signers.
- Joint accounts: A joint credit card works like a traditional credit card, except the account is shared. Cardholders get their own cards linked to the account. And both cardholders are responsible for paying the balance every monthâno matter who made the original purchases.
Keep in mind that some credit card issuers may provide different levels of access for authorized users. And in some cases, the account holder may be able to make the authorized user a manager of the account, which could mean increased account access.
What Authorized Users Can And Cant Do
However, there are some things that an authorized user cant do. The authorized user cannot make changes to the account, like requesting a credit limit increase or adding other authorized users. When it comes to spending power, the primary cardholder can set a limit on the amount of money an authorized user is allowed to spend. The primary cardholder is also the only one responsible for paying off the balance on the card.
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Can I Add Authorized Users To A Business Card
Some business cards allow you to add authorized users, also known as employee cards in this case, while others will not. In general, the rules that apply to authorized users of personal, consumer credit cards also apply to authorized users of business cards .
You may want to add authorized users or employee cards to simplify bookkeeping, and get all your expenses in one account. This is also a good way to give your employees an easy payment option for business spending or travel, while taking advantage of protections and benefits.
Plus, by adding employees as authorized users , youll earn rewards for that spending on your business account. Just remember that only the primary cardholder is legally responsible for paying the card balance.
How Being An Authorized User Impacts Your Credit Score
You can work towards a good or excellent credit score with regular on-time payments as an authorized user on a credit card. However, just like accounts you hold on your own, if you make late payments then your credit score will likely drop.
If you have little or no credit history, becoming as an authorized user is one way to build your credit history. It helps you work your way up and raise your credit score.
Regularly paying the credit card bill on time and not using too much of your available credit are both still important, just as they are when you have your own credit card. Payment history and credit utilization are the two biggest factors of most credit scores, including the FICO® Score and VantageScore. Those are the two of the most common credit scoring models.
However, being an authorized user isnt the only thing that impacts your credit score. You still want to make sure that you pay any loans and credit cards on time as well. Applying for too many credit cards or loans in a short period of time will also likely cause a small drop in your credit score.
How Does Becoming An Authorized User Affect My Credit
The authorized user will see their credit score improve when the main cardholder pays the credit card balance on time and the card provider reports authorized users to credit bureaus.
If the main cardholder fails to pay off the credit card balance on time or keeps piling up debt, and the card provider reports that to the credit bureaus the authorized user will see a drop in their credit score. Luckily, some card providers like American Express report only positive card activity to protect authorized users.
American Express Gold Card
All American Express cards report authorized users to the credit reporting agencies. However, it can be beneficial to get more bang for your buck by becoming an authorized user on a card with a rewards program. The American Express Gold Card offers big rewards for dining and groceries, plus up to $120 per year in statement credits for ordering from Grubhub, Seamless, or other select restaurants, plus a $100 annual travel credit for incidental travel fees.
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How To Add Or Become An Authorized User On A Credit Card
To become an authorized user, ask a trusted family member or friend to add you to their account. Make sure you can rely on the account owner to pay their bill on time every month, and ideally that they pay their whole balance. The lower their utilization, the better using more than 30% of an account’s credit limit at one time can result in credit score damage.
Some cards let the primary cardholder set spending limits for authorized users. But even if that’s not possible, you can informally agree to spend up to a certain amount each month and pay back the cardholder by a certain date.
Does An Authorized User Get His Or Her Own Bill
This depends on the card issuer. In most cases, authorized users will not get their own monthly billing statements. Typically, only the primary cardholder will get a bill.
The charges for the account will usually be combined on the statement, but in some cases the authorized users activity may be separated from the primary cardholders.
Different issuers will also give authorized users different online account permissions, like being able to view statements, make payments, or change contact info. So, even though authorized users usually wont get statements in the mail, they may be able to check those details online.
Since each card issuer has its own policy, we recommend to learn exactly how your issuer handles authorized users, and what your options may be.
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Here Are Some Things To Consider Before Adding Or Becoming An Authorized User On A Credit Card Account
If youâre considering becoming an authorized user or adding one to your account, you might have a few questions about how it works and how it could affect your credit.
As with most things involving credit, the answers can depend on a number of factors. This article will break down some of those factors and offer things to consider about authorized users to help you decide.