Think twice before requesting to be added as an authorized user to someone's credit card account. It can add years of positive credit to your report, but it can also come with consequences. Sure, you may not legally be responsible for the debt associated with that account, but your credit can be affected, for better or for worse.
Being an authorized user can impact your credit situation in a number of ways:
The accounts you're an authorized user on will appear on your credit report. A lot of Credit Karma members are surprised to see a card on their profile that they're "only an authorized user" on, but the fact is, credit bureaus treat these cards as if they were your own.
This setup can make you look bad. Essentially, the primary account holder's actions look like your own. If they miss a payment on this credit card, you miss a payment. If they rack up an extremely high credit card utilization, so do you. This can kill your credit score, the exact opposite of what you want.
Your credit score can be affected, depending on the scoring model. 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. So don't hold your breath if you pay to be added to someone's credit card- FICO won't boost your score.
What about becoming a joint account holder?
The key difference between being an authorized user and being a joint holder is that you have more responsibility as a joint account holder. You're legally expected to pay debt accrued to a joint account. The process of being added to an account is also stricter- lenders will expect you to meet their requirements, like you're applying for a credit card on your own. Authorized users usually won't run into this problem.
Which should I consider?
The authorized user strategy is common for parents who want to help their children build credit. If your parent has established positive credit history and healthy habits that won't backfire on you, you may want to request that they add you as an authorized user. Keep in mind that primary account holders can limit how much of their credit limit you can spend. Joint accounts are more commonly used by spouses who share their finances with each other and don't mind each person having the same credit limit.
A few tips: Contact your bank to make sure they'll report this card under your name and find out what information they'll report. (Better yet, check their policies beforehand.) If you change your mind afterwards, you can easily take this card off your credit report. It's as simple as asking your bank to remove you from the card and stop reporting it. If that doesn't work, you can also file a dispute with the credit bureaus.
So, be smart. Only join up with someone who has their financial accounts in order. If you don't, you may find your credit report marked up with red flags. Nobody at Credit Karma wants that!
(Pssst. If you like sock puppets, check out our video on this topic below.)
About the Author: Charmaine Ng is the Communications Coordinator at Credit Karma. When she isn't writing her way through life, you can find her reading about the latest in entertainment and watching television almost every night of the week. Say "hi" @noodlemaine!
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