Adding them as authorized users on your credit card is a practical approach to assist a family member or close friend who has bad or restricted credit in establishing or establishing their credit. Just be aware that adding a user to your account carries some risk because you will eventually be liable for any debt they accrue while using the card.
Review the advantages and disadvantages given below to help you decide if adding authorized user tradelines to your credit card account is the best course of action for you before doing so.
What are authorized user tradelines?
The primary account holder of a credit card can frequently add a secondary account holder. This individual, referred to as an authorized user, can use the credit card to make transactions but is not legally responsible for the debt.
A credit card is issued to approved users, but they do not have the same access rights as the main account holder. Approved users, for instance, ordinarily cannot utilize rewards, ask for a bigger credit limit, terminate the account, or add another authorized user. Nevertheless, according to the issuer, users might be able to check the account balance, get copies of their statements, and make payments.
Increase your prizes.
Points credit cards frequently let you earn rewards on purchases made by authorized users in addition to earning rewards on your own purchases. The principal cardholder is usually the only one who may use these points.
Keep inactive accounts open.
It's advisable to avoid canceling old credit card accounts whenever feasible because the duration of your credit history (including how long your accounts have been active) contributes to 15% of your credit score.
One card, one account.
One easy approach to managing household spending in one account is to add a spouse or kid as authorized user tradelines. Additionally, if you are a small business owner, adding a reliable employee as an authorized user enables them to use your business credit card account to make purchases on the company's behalf.
Assist a friend or family member to establish credit.
Allowing someone to use your credit card is a simple approach to help them build credit because your credit card activity will also be reflected on the authorized user's credit if you use your card responsibly (by paying your bills on time each month and maintaining a low credit utilization ratio). By adding your kid to one of your credit cards, you may also help them develop credit early on (even those under 18 who can't qualify for a card on their own).
For any card charges, you alone are accountable.
You are ultimately liable for paying back all charges made to your credit card account as you are the account's principal cardholder. Therefore, the primary cardholder will be responsible for paying the balance if the authorized user makes large purchases using the card but has trouble paying their share of the bill. Furthermore, since 30% of your FICO, CPN tradelines Score is based on your credit usage ratio, which compares the amount you owe to your total credit limit, a high debt load by the authorized user may have a negative effect on your credit score.
Since there is no credit check required, adding an authorized user to your credit card account is a rather simple process. Simply let the issuer know over the phone or by going into your account that you wish to add an authorized user. In order for the issuer to confirm the identity of the applicant, you will be required to give personal information about the possible authorized user, including name, address, date of birth, and Social Security number. Once accepted, the authorized user's name will be printed on a credit card that the primary account holder will receive in the mail.