What You Need to Know About Adding Another User to Your Credit Card
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Adding an authorized user to your credit card account can help establish or improve their credit, but how will it affect you? Fortunately, simply adding a new user to your credit card will not negatively affect your credit score. However, there are a number of factors you should consider before you add a new user to any of your credit card accounts.
How It Works
Once you request that an authorized user be added to your credit card account, they will receive a card with their name on it, which has the same buying power as the primary cardholder's credit card. The credit card account will appear on both users' credit reports.
Adding an authorized user to your account is not a decision that should be taken lightly. The authorized user will have access to your credit line, whether the full amount or a set limit (depending on your card). The primary cardholder is the only one responsible for making payments on time every month.
How the Credit Reports Are Affected
Any joint accounts and shared credit cards will appear on all users' credit reports. If anyone on the account makes a bad move, you will all see the negative effects on your credit reports. On the other hand, if the payments are made on time, the balance remains low, and the account remains in good standing, it can help boost everyone’s credit.
They’ll Receive Their Very Own Card
Once you add an authorized user to your credit card, they will receive their own card (in their name) that they can use at will. Remember, they can make purchases at any time, but they are not directly responsible for making payments on the card, so you'll want to be very careful in choosing whom to add as an authorized user. If they rack up debt, it can impact your credit score and credit worthiness.
What if They Have Bad Credit?
If the new authorized user has bad credit, it won't affect your credit score. Their poor credit history will not be reflected on your credit report and will not affect your credit score.
On the other hand, you should be wary of adding anyone to your account that has already established that they can't handle credit. If they rack up large debts or exceed the credit limit, it can affect your credit history and drastically impact your credit score. If they pile on debt that they — and ultimately you — are unable to pay, any late payments will appear on your credit report and can hurt you in the long run.
You Can Control the Card, But Not the User
Once you add a user, you will still maintain control of the account. You can set up alerts for activity and see exactly what purchases were made. You can also remove them from the account later, if needed. However, if you give them their own card in their name, you have no control over how and when they spend the credit line.
If you are concerned about how they will be using the card, but want to help them raise their score, you may consider adding them to the account but never actually giving them the card. They will still receive the benefits, but you won't take on any additional risk, so everyone wins.
Removing an Authorized User
If you later decide to remove the authorized user from the account, you can simply call the credit card company and request it. Typically, the change will be reflected on their credit report approximately 30 days later.
Personal Relationship Effects
Money issues have caused problems in countless relationships. Once you add someone as an authorized user, you are welcoming financial discussions and a link in your credit reports. Keep in mind that if things go sour in the relationship, the new user can still use their card and rack up the balance, which you will solely be responsible for repaying.
Is It a Good Idea?
The authorized user strategy can help establish new credit or rebuild bad credit. So, it may be a good idea to add a child or spouse as an authorized user, particularly if they don't have any credit history of their own.
If your goal is to help increase the authorized user's credit score, it can be beneficial to strategically choose the right account to add them to. Your best bet is to add them to a credit card account that is old, has a low balance, has a positive payment history, and is in good standing. By doing this, you can ensure the most positive effect on their credit history, average age of credit, and utilization rate. This can have a huge effect on their credit score, helping to increase it in no time.
Do you have an experience adding an authorized user to your credit card account? Please share your thoughts in the comments!