Have you heard people talking about being an authorized user/signer on a credit card, but you are unsure of what that means? Are you curious about how it can affect your credit or future loan applications? We have answers to those common questions and more to help you fully understand what it means to be an authorized user and what it can do for your credit.
What is an authorized user?
An authorized user is someone who is given a credit card linked to someone else’s line of credit. The person who was approved for the line of credit is called the primary card/account holder. The authorized user is given their own card with their name on it, but only the primary account holder owns the account and is responsible for making payments. Typically, people are added as an authorized user to a card with a family member, spouse or partner to help establish a credit standing.
What abilities does an authorized user possess?
Authorized users can make charges on the card, but are not responsible for making payments. They can make payments on the card, but cannot be given balance information. Since they are not the primary account holder, they are not able to increase the credit limit, change the due date, or add any other parties to the account.
Can being an authorized user help or hurt my credit?
Being an authorized signer on a credit card does typically report to the credit bureaus in your name. How the card is handled can contribute to the scores of all parties assigned to the card’s account. This means it is important that all parties understand how to use the card wisely to avoid negatively impacting everyone’s scores. If the line of credit is handled responsibly by everyone it is assigned to, it can help to improve your score too.
It’s important to note different credit bureaus and models will use varied weighted calculations on how much of an impact being an authorized user has on your score. Some credit models do not take factor being an authorized user into your score.
How does being an authorized user impact my loan applications?
Although being an authorized user on a credit card can improve your credit score, it is important to know that the account is not heavily considered by loan officers when you are applying for other lines of credit. Lending decisions are made based upon a number of factors, including how well a person pays on lines of credit they are primarily or jointly responsible for and whether they keep the balances low in relation to the limits. Since the account is not directly owned by the authorized user, nor is it their responsibility to make payments, it has very little impact, if any, on getting approved for other loans or credit cards. However, the potential score generated from being an authorized user can impact the interest rates you receive, which can make or break a budget.
Who can add and remove an authorized user?
Only account holders are able to add authorized signers. Then, either party can decide if a card is produced. The card may be printed or mailed, depending on the financial institution’s capabilities.
There are many situations where a person may want to remove themselves as an authorized signer or remove an authorized signer from their account. If scores are dropping from the primary account holder missing payments, a person may want to remove themselves as an authorized signer. Someone may also want to remove themselves or an authorized signer if scores are falling from one of the parties carrying high balances on the card. Other reasons for removal could include death, change in relationship status, or simply a lack of use. In any case, the authorized user can remove themselves from the account, but account owners can remove anyone or close the account. To add or remove someone as an authorized user, ask your financial institution what forms and documentation are required.