What is an authorized user?
Think of an authorized user on your credit card like an honored house guest: They’re welcome to use your credit card account whenever they like, but don’t have any of legal obligations to the credit card company.
The idea behind it is to offer a line of credit to those that otherwise would be inhibited by a poor credit history. In doing so you can also help the authorized user build their credit score; helping them to climb out of a bad credit hole or jump start building their own credit profile.
Additional benefits to the account holder are that it can also boost their own credit score, as well as keep accounts active that may otherwise go unused or risk closure.
Who can make use of authorized user options?
Generally, it’s more likely to go over well if the account holder themselves has a fairly decent credit history. This way they’re more likely be approved for adding an authorized user to their credit account.
On the other hand, almost anyone at all can become an authorized user. The account holder can share their account with a family member, spouse or employee without too much trouble.
Generally, the authorized user will not receive monthly statements so it’s important, if you’re considering entering into this type of arrangement, to make sure the account holder is on top of making repayments and that a solid understanding is in place on what is expected from both parties.
How to make a success of adding an authorized user
If you’re the account holder:
- Only add an authorized user you truly trust
- Monitor your account regularly
- Set agreed spending limits and expectations
- Remember you can remove authorized users at any time, so make sure to exercise this right if things aren’t working out.
- Authorized users get a card with their name on it, but it will be mailed to you. You’re not obliged to hand the card over or give out the account details, so hold on to it if you feel it’s appropriate.
- Consider adding an authorized user to an account with low balances and a good length of credit history, ideally over 24 months.
- You can add an authorized user to as many accounts as you like, though it’s best to limit it to one or two to minimize your risk.
If you’re the authorized user:
- Acknowledge the risk the account holder is taking on your behalf.
- Stick to agreed spending limits and if in doubt, seek permission before making a purchase.
- Only enter into an ‘authorized user’ agreement with someone you trust – it’s a great way to improve your credit score, but if payments on the account are not made, it can also damage it too!
- The type of set-up can strain relationships if not handled carefully. Ensure you both understand the other’s expectations and communicate effectively.
Please note that we are not a credit repair company. For more information, speak with a credit consultant.
About Michigan Lender, Julie Krumholz
Julie Krumholz is has been helping Michigan homebuyers for over 30 years and has several loan programs available for various incomes and financial situations. She brings a wealth of experience to her clients and nothing makes her happier than seeing the face of a happy and excited customer at the closing table.
If you are looking for a mortgage lender in Michigan, call Julie from Superior National Bank today at: 586-382-5482 and let her help you navigate through the loan process and answer any questions you may have.