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How Being an Authorized User Affects Your Credit

Being an authorized user on a credit card can help you establish a credit history and potentially boost your credit score. However, it may not be sufficient for you to qualify for credit independently. Creditors prefer to see evidence of your ability to repay debts and a stable income to support repayment.

How Being an Authorized User Affects Your Credit

If you have never had a credit account, becoming an authorized user can initiate your credit history. When a parent or loved one adds you as an authorized user on their credit card, the card issuer typically reports payments to the credit bureaus, resulting in a credit report and eventually a credit score. If the primary user has a history of on-time payments, low credit utilization, and high credit limits, you might even achieve an excellent credit score.

Some credit cards allow primary users to set spending limits for authorized users, providing a training ground for responsible credit use. However, since authorized users are not responsible for paying the credit card bill, these payments won’t contribute to their own payment history.

If you already have some credit history, becoming an authorized user might have a lesser impact but can still be beneficial. For instance, if you have high credit utilization, being added to a relative’s lightly used card with a high limit can significantly lower your overall credit utilization, which can positively affect your credit score.

How to Build Credit

While being an authorized user is a good start, it is not enough to prove you are a good credit risk. Here are some ways to build credit and leverage your authorized-user status:

Get a Secured Credit Card

A secured credit card requires a refundable security deposit, typically equal to your credit limit. Payments are reported to credit bureaus, and a history of on-time payments can help you build credit. Some secured cards may eventually convert to unsecured cards after a period of responsible use.

Take Out a Credit-Builder Loan

A credit-builder loan works in reverse: you make payments, and the money is released to you at the end of the loan term. Payments are reported to credit bureaus, helping you build credit. Choose a loan with manageable payments to ensure on-time payments.

Apply for a Store Credit Card

Store credit cards are often easier to obtain but may have higher interest rates and lower limits. If they report to credit bureaus, they can help you build credit.

Take Out a Secured Loan, Such as a Car Loan

Secured loans, like car loans, can help build your credit if you make on-time payments. Credit scoring models favor a mix of revolving credit (like credit cards) and installment loans (like car loans).

Other Financial Habits to Build

In addition to responsible use of an authorized-user card, you can set yourself up for success by:

• Creating and sticking to a budget to ensure your spending aligns with your values and you have funds for emergencies.
• Keeping track of your finances by checking balances online and setting up alerts.
• Signing up for Experian Boost® to get credit for on-time utility, telecom, rent, and certain streaming service payments.
• Regularly checking your credit reports to ensure your accounts and payments are reported accurately.

The Bottom Line

Being an authorized user can help you build credit by increasing your credit age, overall credit limit, and history of on-time payments. However, creditors will also want to see that you can repay borrowed money. You can enhance your credit portfolio with a credit-builder loan, secured credit card, secured loan, or other credit products reported to the credit bureaus.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. Our team is ready to assist you with confidence and expertise.

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