It can be hard to build your credit on your own. If you’re new to credit, you might not be able to access the kinds of credit cards that offer low interest rates and high rewards. If you’re dealing with bad credit or damaged credit, you might not be able to access many credit cards at all.
That’s where being an authorized user can help you. By becoming an authorized user on someone else’s credit account, you can piggyback off their credit history—plus, you’ll have access to a line of credit that you can use to make purchases and earn rewards.
Can you build your credit by being an authorized user on a credit card? Absolutely —but that isn’t the only reason to become an authorized user. While many people become authorized users as a way to increase their credit score and help them become eligible for more of the best credit cards, other people become authorized users in order to streamline household shopping, earn credit card bonuses and more.
Many people don’t realize the potential benefits of adding an authorized user to a credit card. Whether you’re trying to build your credit history or simply hoping to earn more rewards on a single credit account, the authorized user option might be exactly what you’re looking for. Here’s what you need to know about becoming an authorized user, how being an authorized user affects your credit score and what to do if you need to remove an authorized user from your account.
What is an authorized user?
An authorized user is a person who is authorized to use someone else’s credit account. When you become an authorized user, you receive a credit card that is connected to the primary cardholder’s line of credit. Any purchases you make on your authorized user credit card become part of the primary cardholder’s credit card balance, and the primary cardholder is responsible for making on-time payments against that balance.
How does being an authorized user impact your credit?
Being an authorized user can impact your credit in both positive and negative ways—but in some cases, it might have no effect on your credit at all.
In order for your authorized user account to impact your credit, your credit card issuer must report authorized users to the three major credit bureaus (Equifax, Experian and TransUnion). Most major issuers report authorized users to the credit bureaus, but it’s still a good idea to confirm what’s being reported. Some credit card issuers, for example, only report positive information associated with authorized user accounts. This can be good for authorized users because it means that any negative or derogatory information associated with the primary cardholder’s credit account won’t show up on the authorized user’s credit report.
If you’re asking yourself whether you should become an authorized user, you should really be asking yourself whether the person on whose account you’re planning to piggyback uses credit responsibly. If the primary cardholder has a history of on-time payments, low credit utilization and other responsible credit habits, their credit usage could have a positive impact on your credit. If the primary cardholder regularly misses credit card payments or runs up high balances, their behavior could have a negative impact on your credit. Choose your primary cardholder wisely.
Benefits of being an authorized user
When you become an authorized user, you get to reap the benefits of the primary cardholder’s responsible credit habits. The credit bureau Experian suggests that if you want to take full advantage of those benefits, you should become an authorized user on a credit account that has a long history of on-time payments associated with it— because that history could have a positive impact on your credit report, as well. This is a great way to start building credit, especially if your own credit history is limited.
Increasing rewards potential
If you become an authorized user on a rewards credit card, your purchases add to the total rewards earned on the card—which means that you and the primary cardholder could rack up a lot of points, miles or cash back. Having two people making purchases on the same credit account is also a great way to earn credit card sign-up bonuses that require you to spend a certain amount in the introductory period.
Sharing household expenses
Becoming an authorized user on a spouse or partner’s credit card account gives you the opportunity to use that credit account to make household purchases and share household expenses. Since most credit card issuers provide authorized users with their own credit cards, you can take more responsibility for the household shopping and build your credit history at the same time.
Drawbacks of being an authorized user
It could negatively impact credit
When you become an authorized user on a credit card, you adopt the primary cardholder’s credit habits as your own. If the primary cardholder makes late payments or runs up a lot of debt—or if the two of you max out your shared credit account together—it could have a negative effect on your credit score.
Primary cardholder responsible for payments
Although you can give the primary cardholder money for any charges you make as an authorized user, only the primary cardholder can make credit card payments on the account. Since both of your credit scores could be affected by late or missed payments, you should only become an authorized user if you know the primary cardholder is going to make responsible on-time payments.
Could run up more debt than you realize
When two people use the same credit account, they might make purchases that the other person isn’t aware of (and these extra purchases could turn into debt that is difficult to pay off). Some primary cardholders set limits on the amount of money an authorized user can spend to ensure that there aren’t any surprises at the end of the month.
How to add an authorized user
Adding an authorized user to a credit card is relatively easy. In many cases, you can add an authorized user through your online credit card account. You can also call the number on the back of your credit card to begin the process. Be prepared to provide your authorized user’s name, phone number, date of birth and Social Security number.
Once the authorized user has been added to your account, your card issuer will provide them with a credit card that is connected to your credit account. Some card issuers may mail the credit card directly to the authorized user and others may send you the card with instructions to pass it on.
Be aware that some credit cards come with authorized user fees. These are one-time fees that you pay when you add an authorized user to your account and can range from around $35 to over $100.
How to remove an authorized user
Removing an authorized user from your account is also relatively easy—you can begin the removal process online or by calling the number on the back of your credit card. Once you complete the process, it’s a good idea to send your credit card issuer a certified letter confirming the agreement to remove the authorized user from your account. (If you are an authorized user and you want to remove yourself from someone else’s account, follow the same two-step process.)
It’s also a good idea to retrieve the credit card issued to the authorized user to ensure they can no longer make charges against your credit account. If the authorized user will not give up the credit card, contact your credit card issuer and request a new credit card number—and don’t forget to change any automatic bill payments or subscription service payments associated with the account.
Difference between authorized users and joint account holders
Joint credit card accounts aren’t easy to find—only a small number of banks and credit card issuers offer them. That said, here are the primary differences between authorized users and joint account holders.
When you become an authorized user, the primary cardholder adds you to their credit account and gives you the ability to make purchases with their credit card. Only the primary cardholder can make payments on the credit card account, and the primary cardholder could set a limit on the amount of money you’re allowed to spend. Not all credit issuers report authorized users to the three credit bureaus, so your authorized user account might not become part of your credit history.
When you become a joint account holder, you and another person apply for a credit card together. Both of you are liable for any debt taken out on the credit account, can make payments on the account and have access to the entire credit limit associated with the account. Your credit issuer will report your joint account to the credit bureaus and it will become part of your credit history, so make sure you and the other person on the account use your joint account responsibly.
The bottom line
Becoming an authorized user can help you build your credit. Sharing a credit card with a partner or spouse can also help you work together to earn credit card rewards, manage household purchases and more.
When you are an authorized user, your credit score can be affected by the way the primary cardholder uses the account, so make sure you only become an authorized user with someone who has responsible credit habits and a good credit score. If either you or the primary cardholder wants to end the authorized user relationship, contact your credit card issuer to remove an authorized user from the account.
Is There a Difference Between No Credit and Bad Credit?
The short answer is yes, and understanding the difference could be instrumental in getting better credit.
No credit and bad credit often get grouped together. It’s understandable why, as they both sound similar enough. And if you have either, the next step forward is to focus on improving your credit.
The two situations aren’t the same, though. It’s important to know the difference, because the right way to build your credit often depends on whether you have no credit history or bad credit.
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The difference between no credit and bad credit
Having no credit means that there’s not enough information on your credit file to calculate a credit score for you. It’s also known as being credit invisible. Sadly, this is an issue that affects millions of Americans.
There aren’t any problems on your credit file; the credit bureaus just don’t have enough data on you. That means when a lender or any other third party checks your credit, there’s nothing to go on.
Meanwhile, “bad credit” is a common term used to describe a low credit score. That low score is because of negative items on your credit file, such as not paying your credit card bill.
When you have no credit, the solution is to build your credit. When you have a low credit score, the solution is to rebuild your credit. Now, let’s look at how you can do each one.
How to build credit for the first time
Here’s the simplest way to build credit:
- Open a credit card.
- Use the credit card for at least one purchase per month.
- Always pay your credit card bill on time and in full.
It’s that easy; that’s all you need to do to get a good credit score. When you use a credit card and pay the bill on time, you establish a positive payment history. That’s the biggest credit scoring criteria.
The tricky part when you have no credit is finding a credit card you can qualify for. Secured credit cards are one of the most common options for consumers in this situation. You pay a security deposit for this type of card, so it’s possible to open a secured card even if you have no credit.
If you’re in college, credit cards for students are available. These are often an option for applicants without any credit history.
How to rebuild a low credit score
It’s a little more complicated to rebuild your credit. First, you need to find out what negative items are affecting your credit score. Here’s how to start:
- Use an online credit score tool to check your score and learn about any items damaging your credit. If you have a credit card, there may be a credit score tool in your online account. If not, there are plenty of free ways to get your credit score.
- Request your credit report from the three consumer credit bureaus (Equifax, Experian, and TransUnion). You can pull a free annual credit report from each bureau, and through April 2022, you can get free weekly credit reports. Your credit report will show you exactly what’s affecting your credit.
Once you know what’s affecting your credit, you can work on correcting it. Below are a few of the most common issues and how to fix them.
Problems with your payment history
This includes anything related to not paying a bill on time, from late payments to having accounts go to collections.
The first step is catching up on your payments. If you can’t pay in full, contact your creditors and see if you can set up a payment plan with them. They may be willing to work with you if that means you’ll be making regular payments.
Next is rebuilding your payment history. The easiest option is to use a credit card at least once per month and pay in full by the due date. Why do you need to use a credit card? Credit card companies report on-time payments to the credit bureaus, which helps your credit score. With other types of bills, your on-time payments typically don’t get reported to the credit bureaus. That means you may not be able to improve your payment history with rent, utilities, or other monthly bills.
If you already have credit cards, you can continue using them to rebuild your payment history. If you don’t, look for secured credit cards and apply for one you like.
Using too much of your credit
A big factor in your credit score is your credit utilization ratio — your credit card balances divided by your credit limits. If this number gets too high, it can lower your credit score. The standard recommendation is a credit utilization ratio of under 30%.
Let’s say you have one credit card with a $4,000 balance and a $5,000 credit limit. That would put your credit utilization at 80% ($4,000 divided by $5,000 is 80%), a very high number that would decrease your credit score.
Fortunately, only your current credit utilization matters. Once you pay down your credit card balance, your credit score will bounce back.
Errors on your credit history
A low credit score may be due to an error and not any action on your part. This is why it’s so important to pull your credit reports from each credit bureau. By reviewing those, you can see if there are any mistakes.
If there are errors on your credit report, you can go to the credit bureau’s website to dispute them online and get them removed.
A low credit score and a nonexistent credit score are both things you can change. After you determine exactly what the issue is, you’ll be able to choose the best solution to fix it.
‘There is no new normal’: Worcester small business owner pivoted during COVID-19 and expects only more change after pandemic
It took about eight minutes for the bank to reject Natalie Rodriguez’s application for a loan through the Small Business Administration.
Rodriguez opened Nuestra, a Puerto Rican inspired restaurant in Worcester, in January of 2020. When COVID-19 arrived months later she discovered Nuestra wasn’t eligible for the federal or state funding that thousands of other establishments received.
To qualify, restaurants were required to show payroll and salary for years before 2020. Those figures didn’t exist for a restaurant that weren’t open in 2019.
“[I was] determined and knew that ‘no’ is not an OK answer,” Rodriguez said. “A door may close but you may need to kick down another door.”
Rodriguez then applied for conventional loans only to be led to more closed doors. Less than 10 minutes after applying for an Economic Injury Disaster Loan, she received notice that her poor credit score resulted in her application being denied.
Rodriguez used the dead end with the SBA to create a new path for herself and Nuestra.
She not only learned how to improve her credit but wanted to ensure others didn’t have to follow her journey as an entrepreneur.
Rodriguez extended the “Nuestra” brand to include financial advising. She started Nuestra Financial in April of 2020.
“Now I’m helping others. I’ve been able to restore my credit,” Rodriguez said. “I’ve been able to help others restore their credit and be able to help them make a business themselves if they so choose. I’ve been able to survive.”
Without grants and other funding, Rodriguez managed to keep her restaurant open through funds generated from Nuestra Financial.
“I was very quiet about it in the beginning. I didn’t want people to be like, ‘Oh look at this girl, she just opened a restaurant in the middle of a pandemic,’ and talk smack,” Rodriguez said. “About a month or two later, a light bulb hit and I was like, nobody pays my bills but me. I needed to mind my own business and not worry about what other people thought.”
In creating Nuestra Financial, Rodriguez said she’s helped Worcester residents restore their credit and purchase new vehicles and homes.
Rodriguez said financial literacy is rarely taught to children in school and wasn’t something she learned. When a situation arises like a rejection notice for an economic disaster loan, many don’t know how to respond or where to find answers.
Rodriguez said she’s helped young and old people, along with those who have bad credit or no credit.
“We lack the confidence, including myself, because we weren’t taught,” Rodriguez said. “So if you don’t know something, you weren’t taught, you’re not going to be confident about it.”
Coming out of the pandemic, Rodriguez remains confident about both her businesses. Nuestra, the restaurant, while closed for daily service continues to provide catering services. Rodriguez is still preparing what the future holds for the restaurant but plans to announce an update soon.
As masks start to become less a part of daily routines, Rodriguez, as a small business owner, doesn’t envision many differences from this year to last.
So many aspects of life remain uncertain from rising food costs to a potential third booster for vaccines and whether the country will ever reach herd immunity for COVID-19.
The pandemic arrived with Rodriguez immediately pivoting. As it approaches its potential end, Rodriguez will continue to do what helped her to navigate it.
“I feel like there is no new normal just yet,” Rodriguez said. “I think we’re all just trying to adjust and pivot at the same time and getting creative. I think it’s where we all are.”
Columbus Mattress Wholesale moves to newer, larger Gahanna store
More than four years back, Cathryn Clark’s boyfriend, Christopher Robbins, was on the hunt for a new mattress. He just couldn’t find one at an affordable price.
Clark, 29, and Robbins, 34, who are now engaged, were living in Franklinton, where they still live today.
They had no experience owning or operating a small business; Robbins worked as a retail assistant for SAS Retail Services while Clark worked as the communications director for two Methodist churches.
But in 2017, Robbins, with Clark at his side, took the leap and opened Columbus Mattress Wholesale on the West Side, with the goal of helping low-income consumers secure mattresses and other bedtime products.
“We really wanted to bring a store to people that, you know, they weren’t paying an arm and leg, but they still could get a good night’s sleep,” Clark said.
Customers at Columbus Mattress Wholesale can pay cash or credit, for example, but the business also works with financing companies that serve people without credit scores, with bad credit or who are lower income.
Last month, the business made a big move. It expanded from its original location on Harrisburg Pike to a store double the size at 435 Agler Road in Gahanna.
Clark said she and Robbins saw a need in the broader area, with many of their customers coming from outside the Hilltop, such as Linden.
Nestled between Dollar Tree and the Ohio BMV in Gahanna, the new storefront opened Memorial Day weekend and sells mattresses, bed bases, bed frames and pillows. Mattress prices range from under $100 to more than $1,000, depending on the size and brand, which includes some well-known names such as Serta, Beautyrest and Casper.
Clark said while she and Robbins originally sold solely Ohio-based brands, they’ve branched out to national brands as business has grown.
Columbus Mattress Wholesale also offers free same-day delivery on most orders from customers living in Columbus.
Clark does a little bit of everything for the business, from running communications, to working on the sales floor, to managing the sales team, to ordering what they sell.
She said a big mission for herself and Robbins, beyond doing business, is aiding the community.
“We’ve seen a lot of people struggle,” Clark said.
Clark said she and Robbins work to mentor other people who are hoping to open or currently own a small business. She added that the store starts employees at $17 per hour.
She and Robbins haven’t decided yet what they will do with the original location — which is currently closed — but said they might shift it into an accessory store.
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