Does Being an Authorized User Build Credit?

Looking to establish credit or improve your credit score? Having a good credit score is helpful when it comes to obtaining a car loan, personal loan, or mortgage. A higher score also helps you secure more favourable terms including a lower interest rate, lower fees, and a higher credit limit. 

While it is possible to build credit by becoming an authorized user, this isn’t always the case. In some scenarios becoming an authorized user can negatively impact your credit and sometimes it will have no effect on your credit at all.  

What is an Authorized User?

An authorized user is a person who is authorized to make credit card purchases using someone else's credit account. It is common for partners, spouses, or parents to include an authorized user on their account. For instance, a parent might add their teenager as an authorized user so they have access to credit when they need it. 

As an authorized user, you are not considered a primary user. The primary cardholder is the person who applies for the credit card and signs the credit card agreement. The primary cardholder is the one responsible for paying off any charges made on the card and takes on all liability. They also have the authority to make changes to the credit account such as increasing the credit limit or adding an authorized user. 

As an authorized user, you do not take on any responsibility. You are not responsible for making payments. You also don’t have any authority to make changes to the account.  

What is the Minimum Age Required to be an Authorized User?

While you can not get your own credit card in Canada until you are 18 years of age (or the age of majority in your province or territory), some issuers will allow an authorized user under the age of majority. The minimum age required to become an authorized user depends on the specific credit card issuer.  

Does Being an Authorized User Affect Your Credit?

Authorized Yes, in some cases, being an authorized user can affect your credit. However, this can only occur if the credit card companies report the authorized user account to the credit bureaus – Equifax and TransUnion – and it shows up on your credit report. The primary cardholder can reach out to the credit card issuer to confirm whether or not they report this information. If the credit card company doesn’t report to the bureaus, becoming an authorized user will not affect your credit.  

It’s important to note that while your credit score can be impacted, your payment history will not because you are not responsible for making the payments. This responsibility falls entirely on the primary cardholder. However, becoming an authorized user can potentially help you establish or improve your credit by contributing to your credit history, which accounts for about 15% of how your credit score is determined. 

Before you become an authorized user on a partner, spouse, or family member's credit card, make sure you talk to them about their credit card usage habits and history. You don’t want to become an authorized user with a primary cardholder who doesn’t use credit responsibly, as this can negatively affect your credit score.

Similarly, if you are thinking about adding a spouse or child as an authorized user, talk to them about your expectations for how they use credit. You don’t want them racking up a credit card balance that you don’t have the ability to pay off.  

How Does Being an Authorized User Help You Build Credit?

If the credit card company does report authorized users to the bureaus then this can help you to build or improve your credit. Even if the primary cardholder doesn’t provide you with your own card to use, simply being added to their account can show up on your credit reports. 

However, how the primary account holder manages their payments can impact your credit. Becoming an authorized user can be a great strategy to build credit, providing the primary cardholder is a responsible credit user who pays their bills on time and in full each month. However, if they make their payments late or miss payments entirely, this can have a negative impact on your credit score. 

If you want to establish or improve your credit and you don’t have the opportunity to do it as an authorized user, there are other ways. For instance, you can look at getting a secured credit card. A secured credit card functions like a regular credit card, although you have to put down a deposit before you can use it, and this deposit becomes your credit limit.

What are the Advantages of Becoming an Authorized User?

Becoming an authorized user can come with several potential advantages, including: 

Access to credit 

If you have no credit history or poor credit and you can’t secure a credit card on your own, becoming an authorized user can give you access to credit. The convenience that comes with using a credit card versus having to carry around cash is a major plus.  

Potential to build credit 

Providing the credit card company reports to the credit bureaus, you may have the opportunity to build or boost your credit score by becoming an authorized user with someone who has a positive credit history. If your parents choose to add you as an authorized user while you're a teenager, this can provide you with an excellent headstart for building credit. 

Building positive habits

Being added as an authorized user can also provide a good learning opportunity. For instance, teenagers can use this as an opportunity to observe how their parents use their credit cards. If parents have excellent credit because they pay off their credit card on time and in full each month, their child can observe and learn these positive habits before getting a credit card of their own.

Simplicity 

Becoming an authorized user on a friend, family member, or even an employer's account is an easy way to share credit. Having only one credit card account shared between partners, a family, or within a small business can also make it easier to manage payments. Rather than trying to juggle multiple accounts, you just have one payment to make. 

What are the Disadvantages of Becoming an Authorized User?

There are also some disadvantages associated with becoming an authorized user. These can include:  

No opportunity to build credit 

If the credit card issuer does not report to the credit bureaus, then you can’t build or improve your credit by becoming an authorized user. This is why it’s important to have the primary cardholder ask the credit card issuer if they report to the credit bureaus. 

Negative effect on your credit

If you become an authorized user on someone’s account and they do not manage their credit responsibly, this can negatively affect your credit score. Luckily, you can generally remove yourself as an authorized user by contacting the credit card company. You also might be able to remove yourself through your online banking. 

Be aware that by removing yourself as an authorized user this may impact your credit score by reducing the length of your credit history. If the card you were an authorized user on was the oldest card you had (for instance, if a parent added you when you were a teenager before you could access credit on your own), you will reduce the length of your credit history without it. 

Lack of control 

As an authorized user you have very limited control over the credit card. You can’t request an increase in the credit limit, add a user, or close the account. Plus, the primary account holder can decide to remove you as an authorized user from the account whenever they want. As was mentioned above, this could reduce the length of your credit history. 

You can damage someone else's credit

If you don’t use credit responsibility as an authorized user, you can damage the primary cardholder's credit score. For instance, if you are always racking up the credit card, this can have a negative impact on the primary users’ credit utilization ratio. If you spend too much and the primary cardholder can’t afford to pay it off, you risk putting them in credit card debt.  

Fees

Some credit cards charge an annual fee for supplementary credit cards. The primary cardholder can check with the credit card issuer to see if there is a fee attached. Usually, the cost of a secondary card is less than the annual fee on the primary card. 

How to Become an Authorized User?

To become an authorized user, work with the primary cardholder to complete the following steps: 

1. Primary cardholder makes the request. The primary cardholder will need to reach out to their credit card provider to make the request. They can typically do this by calling the credit card company or by applying online.  

2. Fill out an application. The primary cardholder will have to fill out an application to add you as an authorized user. Generally, they will need to provide their name and banking information. They will also need to provide some of your personal details which may include your name, date of birth, address, relationship to the primary cardholder, and occupation. 

3. Receive the additional card. Once the request goes through and the credit card issuer approves you as an authorized user, a supplementary credit card is mailed out. It’s up to the primary cardholder to decide if they want to give you the supplementary credit card to use or if they want to hold onto the card and only give you access at particular times. For instance, if you are a teenager and your parents only want you to have access to their credit card when you are travelling without them. 

The Bottom Line

Being an authorized user can affect your credit but not in every case. If the credit card issuer reports to the credit bureaus then becoming an authorized user can help you to establish or build credit, but make sure the primary cardholder has a solid history of responsible credit use. If you become an authorized user with a primary cardholder that makes late payments or misses their payments, this can have a negative effect on your credit score. Finally, if the credit card issuer doesn’t report to the bureaus then becoming an authorized user will have no effect on your credit score.