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You want to add another person to your credit card

What you need to know about adding an authorized user to your credit card

When we hear about the credit building process, we often think about payment history, credit utilization, and not having too many inquiries. Did you know that length of credit is also part of our credit score? If you are just starting to build credit, you will have to wait for time to pass to build your credit history. One way to speed up the credit history process is to become an authorized user on another individual’s credit card. Although the primary cardholder is ultimately responsible for making the payments and can revoke access at any time, an authorized user can make purchases anytime and is never responsible for repayment.

Here are some pros and cons of adding an authorized user to an account.

Pros: 

  • Being added as an authorized user can help establish and re-establish credit. Most credit card companies report on both the primary cardholder and the authorized user’s credit reports. Making on-time payments and keeping the utilization low can increase both the primary cardholder and the authorized user’s score.
  • Adding a person as an authorized user allows them to use the card at retailers without hassle. Being an authorized user protects you in the event of fraud.
  • If the primary cardholder does not use the card often, there is a chance that the credit card company can close it for inactivity. Adding an authorized user who uses the card more frequently will assure the account is not closed.

Cons: 

  • The credit limit is shared between the primary cardholder and the authorized user. Sharing the credit limit requires communication and management to maintain low credit utilization.
  • The authorized user can make purchases, whereas the primary cardholder is responsible for the charges made to the account. Late payments or high credit utilization can hurt the primary cardholder and the authorized user simultaneously.

Adding an authorized user to your credit card account has its pros and cons. Before adding an authorized user, make sure there are no hidden fees involved. If the sole idea to add someone to your account is to help them build their credit, remember you do not have to give them a card. Simply having them listed as an authorized user will still help boost their score. If you are looking for more tips to increase or start building your credit score, email me at Creynolds@newdimensionsfcu.com or call (207) 660-6267. Together we can look at your credit report and work on increasing your score!