Authorized Users

Many people are unaware of the fact that nearly all credit-card issuers allow cardholders to grant other people access to use their credit. Joint bank accounts, loan co-signers, and mortgage co-borrowers are fairly regular things, so why not a credit card that can be used by two or more people? Those with access to use a credit card aside from the primary cardholder are called authorized users or secondary cardholders.

The process for adding authorized users is relatively straightforward. Typically, and often via the website of the card issuer, you provide information about the person you want to make an authorized user. This information usually includes name, address, phone number, and SSN. Better yet, no credit check or hard pull occurs for either party when someone is made an authorized user. Usually within a week, a new card is sent out for that person.

Primary and secondary cardholders on an account share that credit line, meaning that if the primary account holder has maxed out the card and the secondary account holder attempts to use it, or vice versa, the transaction will be declined. Bills may be sent only to the primary cardholder or both primary and secondary cardholders, but only the primary cardholder is responsible for the debt. If the primary cardholder doesn’t pay the bill and it’s sent to a collection agency, the secondary cardholder isn’t responsible for that debt.

The benefits for the primary cardholder when adding a secondary cardholder are usually minimal. There will be no credit report or credit score impact for the primary cardholder, although sometimes credit cards will offer you a small bonus for adding authorized users. Additionally, most cards have limits on how many authorized users you can add, usually between one and five additional users.

Aside from the general convenience of being able to share a credit card with someone, there may be considerable benefits with respect to credit reports and scores if you’re an authorized user. Most credit issuers report authorized users to the credit-reporting agencies; thus, the account shows up on primary and secondary cardholders’ credit reports. Discover, Chase, American Express, Citi, Capital One, Bank of America, and many others all report authorized users.

Depending on the credit-scoring model used, being an authorized user might or might not affect your credit score at all or it might affect it in the same way as if it were a regular account. In my experience, and as credit-score models and versions have changed over time, it’s usually treated as more of a regular account. This means that the authorized user will get the benefit of having that line of credit factored into their credit utilization, payment history, and total number of accounts and none of this requires a hard pull!

Here’s the really exciting thing about being an authorized user. Most credit issuers, when they report the account, will use the primary cardholder’s account opening date as the authorized user’s date as well. Just got married and your spouse has a 20-year-old credit card on which you can become an authorized user? Congratulations! You now have a backdated 20-year-old line of credit adding to your credit age. Nearly all issuers do this, although some have changed how they report the account date over time. As far as I know, American Express is the only company that doesn’t backdate authorized-user-account opening dates.

Finally, here are four considerations when adding authorized users:

1. When credit reports and scores are examined, especially by underwriters for home and auto loans, they might totally disregard accounts where one is an authorized user. This won’t affect the primary cardholder’s ability to get a loan, but it could affect secondary cardholders. A natural-grown credit score of 800 is better than an artificially inflated credit score of 800.
2. Because the impact on the authorized user’s credit report and score is similar to that of a primary cardholder, typically, you’ll only want to add someone as an authorized user on an account that’s free of late payments, has low utilization, and will increase their credit age.
3. Both parties must be confident that the other will use the card responsibly. The primary cardholder might want to confiscate the authorized-user’s credit card if it was obtained for the sole reason of helping their credit score. Likewise, if the secondary cardholder is concerned that the primary cardholder’s use will negatively affect their credit report, they may not want to be an authorized user. At any time, however, the secondary user can cancel the card and have it removed from the credit report with no negative consequences.
4. Most credit-card issuers offer many different credit cards and have rules about how many you can obtain from them in total, as well as if they’ll grant you one if you have several newly opened accounts. Being an authorized user may negatively impact your ability to establish new accounts as a primary cardholder, although this won’t be an issue for 99% of people and can easily be fixed by closing your secondary cardholder account. I will discuss this more in a future post.