How Does Becoming an Authorized User Affect Your Credit Score?

Becoming an authorized user can do wonders for your credit report but it can also do some harm if you’re not careful. Here’s a run down on how becoming an authorized user can affect your credit score.

The Basics

When you become an authorized user on a credit card, the credit card should show up on your credit report within a month or two, usually backdating to when the original credit was opened. Thus, becoming an authorized user can improve your credit score by doing these things:

  • 1) Lowering your credit card utilization
  • 2) Improving payment history
  • 3) Increasing the average age of accounts
  • 4) Diversifying your credit (this factor plays a very limited role).

To maximize the benefits of being added as an authorized user, your goal should be to get added as an authorized user to an account that:

  • 1) Has as close to 0% utilization as possible
  • 2) Has flawless payment history and no negative reports
  • 3) Is older than your average age of accounts.

However, if utilization is your sole problem and you can knock it down significantly by getting added as an authorized user, then that should take precedent over your average age of accounts.

For example, let’s say you have one credit card with a $1,500 credit limit and that credit card is 5 years old. So your overall utilization is 99% and your average age of accounts is 5 years.

Now, let’s say you could be added to someone’s card with a $10,000 credit limit but the card is only sixth months old. This will bring down the average age of accounts for you to around 2.5 years but it will knock your utilization down to 13%. Since utilization carries more weight in determining your credit score than your average age of accounts, it would make sense to jump on as an authorized user.

How much can your score benefit?

How much your credit score can increase all depends on various factors that are at play, so it’s impossible to predict in any specific way. Generally speaking, however, if you have a very thin profile, then bringing down your utilization and increasing your average age of accounts can have a substantial effect on your credit. Anywhere from a 20 to 50 point increase is certainly obtainable, although YMMV.

Just don’t expect too much benefit. The credit bureaus employ formulas to minimize the benefit to those who are solely trying to bolster their score with these tactics called “piggy backing.” This means that you probably will start to hit a point of diminishing returns after being added as an authorized user to several credit cards.

Make sure the new account is reported

Not all banks require you to provide a social security number when adding someone as an authorized user but it all depends. American Express will usually ask for a social security number at some point while banks like Chase don’t.

If the person adding you is associated with you (e.g., you share the same address), then there may be a better chance for the banks to report it to the authorized user’s credit report but you should always follow up to ensure that it gets reported.

Does it cause a hard pull on your credit report?

No, I’m not aware of any bank that conducts a hard pull on your credit when being added as an authorized user. And it really wouldn’t make sense for them to do it — after all, you’re not liable for the payments in anyway so you couldn’t really pose a true risk to banks (although if you ran up a crazy high balance I guess you could indirectly pose a threat to them but that’s another story).

Will negative marks on the primary cardholder’s account affect my credit score?

According to Credit Karma:

The VantageScore 3.0 model only includes positive information from authorized user accounts. On the other hand, the FICO model includes positive and negative marks from legitimate authorized user accounts but will sniff out anybody who games the system.

Thus, you should expect for negative remarks on the primary cardholder’s account to affect your credit score. They might not always count against you but I would just assume that they will, unless you know 100% for sure that they don’t.

So before you go requesting to be added to different credit cards do your best to get assurance that the credit history on that account is as flawless as possible.

Is the primary cardholder reliable?

Make sure you that the person adding you as an authorized user is not irresponsible. If they end up maxing out the credit line that you’re added to, your utilization will go way up and your credit score will likely go way down! Although you wont be personally responsible to pay the credit card bill, you will “pay for it” with a lower credit score.

Removing yourself as an authorized user

Usually, removing yourself as an authorized user is simple. You contact the bank and tell them you need to be removed and they take you off. It is usually instant but may take a short while to show up on your credit report. If it doesn’t show up as removed or if you want to expedite the process, simply file a dispute with the credit bureaus.

Just remember that your score might go down if you were relying on that account to lower your utilization, maintain a longer average age of accounts, etc.

Business accounts

Most, if not all, authorized users on business credit card accounts will not be reported to your personal credit report. Therefore, being added to a card like the Chase Ink Plus, should do you no harm but also no good in terms of your personal credit report.

Cover photo by Sean MacEntee via Flickr.

 

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