When you are filling out credit card applications, most of the time the question of adding an authorized user will pop up. Adding another person to your credit card account will result in an extra card being shipped out to you, with the authorized user’s name printed on it. They will, as a result, be granted the power to make purchases the primary accountholder will be ultimately responsible for. Authorized users can be a double-edged sword that comes with certain risks and benefits.
- Authorized Users & Credit Score
- How Primary Account Holders Are Affected
- How The Authorized User's Credit Score Is Affected
- Authorized User vs Co-Signer
- Authorized Users & Credit Card Rewards
- Should I Add My Child As An Authorized User?
One of the biggest factors to weigh in the decision to add an authorized user is the impacts it can have on credit score. Both sides of the table can be affected by the arrangement, and not always in a positive way. Below we outline the risks and benefits to both the primary accountholder and the authorized user.
The primary account holder is responsible for all the purchases made by the authorized user. If the person added to the credit card account racks up a ton of credit card debt, it could have two implications on the primary accountholder's credit score. First, their total credit utilization goes up. Generally, you want to use no more than 30% of your total available credit. Going over that threshold may negatively impact one’s FICO score. Secondly, if the debt amassed is one you cannot pay off, or are late to pay, the consequences (known as derogatory marks) will be reflected only on the primary accountholders credit history –- not that of the authorized user.
Outside of what's outlined above, adding an authorized user will not have other effects to the credit score. As a matter of fact, your credit history won't even specifically note that an authorized user was present on your credit account.
The credit score of an authorized user will only be affected if the issuing bank reports them to one of the three credit bureaus: Experian, Equifax, and TransUnion. Our research found that most of the biggest credit card issuers in the United States report additional users to all three. The following issuers report authorized users to credit bureaus:
- American Express
- Barclaycard (Only Equifax* and TransUnion)
- Bank of America
- Capital One
- Credit One
- Department Stores National Bank
- Navy Federal Credit Union
- Synchrony (Only Experian & TransUnion)
- US Bank
- Wells Fargo
It has been reported that Equifax will remove the authorized credit account from their report, if the user is not a spouse. However, this has not been confirmed by Equifax.
How an authorized user handles their account will have no bearing on their credit score. The line of credit issued in their name will only appear as a single line item on the credit reports, alongside the age of the account. Conversely, if the primary account holder engages in bad credit behavior, such as late payments, it will not negatively impact the authorized user’s score.
Co-signers are different from authorized users in that they take on a part of the responsibility for the account. If they don’t pay their bill, they will be affected just as though they were the sole individual in charge of the card.
While anybody can be added as an authorized user without a credit check, an issuer will look at the credit history of both co-signers before approving their application. For example, if you have excellent credit and your co-signer has a subprime one, you may be rejected for the loan or line of credit.
Authorized users can affect both earning and redemption of credit card rewards. The specifics will differ from issuer to issuer.
First, adding an authorized user can help you reach the minimum spend requirement for a welcome bonus. All the spending on the account, including that of the authorized user, will count towards this minimum. Some credit cards require users to spend as much as $5,000 in 3 months to qualify for these signup bonuses. Someone who is a low to moderate spender may have difficulty reaching this kind of threshold.
Some credit cards, like the Chase Sapphire Preferred® Card, will also offer bonuses for adding authorized users. Most of the time, all that is required is for the authorized user to be added and for them to make a purchase on their card within some specified amount of time. In the example of the Chase Sapphire Preferred® Card, you can get 5,000 bonus Ultimate Reward points after you add the first authorized user and make your first purchase within the first 3 months from account opening.
Some issuers allow authorized users to redeem the reward points accumulated in the account. This adds to the list of liabilities that come with adding a person to your account. If you think of your points as a savings account, you should be comfortable with the person having access to it at all times. We've found this to be the case if your card is issued by Chase, Citi, or Wells Fargo.
|Issuer||Can Authorized Users Redeem Rewards?|
|Bank of America||No|
|Wells Fargo||Yes, if the primary account holder chooses|
There are clear financial benefits to your child if you add them as an authorized user, as long as the card issuer reports these users to one of the three credit bureaus. If they do, then adding your child to your credit card account will make it appear on their credit file. How you use your credit account will not have an effect on the child. All that will appear on their credit history is the account they belong to and its age (how long you've had the credit card open for).
Adding a child as an authorized user will begin paying off once they want to apply for their first credit card or loan. Normally, young adults need to apply for student credit cards or credit cards for users with no credit. By adding the child to your account, a score will be generated for them, opening up their options as well as making their loan terms more favorable. For example, having a high credit score can qualify one for lower APR and higher rewards.
Most issuers will allow you to add a child so long as they are at least 13 years old. In certain cases, such as Chase, the online application will only require you to provide a name and address. If that’s the case, you can hypothetically add an individual that is as young as a day old to the card. However, if no social security number is linked to the person, the bank may not send over payment information to the credit bureaus, as they will not have a way to uniquely identify your child.
Though we refer to “your child”, in reality, there is no restriction on who you can add as a user –- even if that person is below the age of 18. There are also currently no regulations requiring that the authorized user be a family member, even if they are a minor. As we noted above, however, some issuers may not report the account to the credit bureaus if the authorized user is not a spouse. Since most of the major credit card issuers don't abide by this rule, most individuals shouldn't have a problem with this.