If you’re building or rebuilding credit, one step you can take is becoming an authorized user on someone else’s credit card. As an authorized user, you’ll receive a credit card with your name on it and the primary cardholder’s account number. You can use the card at any time, but the bills will go to the primary cardholder.
Becoming an authorized user helps you establish good credit, since on-time payments may be reported to the credit bureaus under your name. It also provides you with the convenience of a credit card, even if you couldn’t get one on your own.
A lot of people adopt this as a method to build or rebuild credit. Parents may add children as authorized users to help them start building credit. Or, sometimes, one partner in a relationship will have a better credit score than the other and, as an authorized user, the partner with less-than-stellar credit can still enjoy all the benefits of a high-end rewards card.
There are some other benefits of adding a partner as an authorized user. Some couples find it convenient to share one credit card account. They can track spending more easily and accrue rewards faster by using one card for all their purchases.
An authorized user doesn’t even have to be a relative. A cardholder can name anyone they trust as an authorized user.
Process to remove an authorized user
There are many reasons why someone may want to be removed as an authorized user and the process is very simple.
If you are the cardholder
To remove an authorized user, call the number on the back of your credit card to reach the card issuer’s customer service number and request the authorized user to be removed from the account.
The process to remove an authorized user varies by credit card issuer, however, in any case, the change will take effect immediately. Credit card issuers may even allow you to remove an authorized user online or via the company’s mobile app.
Sending a letter via certified mail that references the customer service call and details—the name of the user being removed, last four digits of the account number and date of the call—is a way to ensure that the action has been completed. Or, have a point of recourse with the credit card issuer if it isn’t.
If you are removing yourself as an authorized user
If you are removing yourself as an authorized user on an account, the process is the same as above.
Step 1: Call your credit card company’s customer service number (found on the back of your card) and ask to be removed as an authorized user on the account. Depending on the issuer, you may be able to do this through your online account or via the company’s mobile app.
Step 2: Follow up with a letter that references the call to the customer service line, the date of the call, the last four digits of the account that you would like to be removed from and your full name. Should any mistakes be made, send via certified mail so you have some proof of your communication.
It’s worth noting that once you do that, you will no longer be allowed to use the card or redeem rewards. If you have any automatic purchases set up with that card, make sure to go online and add a different account or your purchases will be declined.
Risks of becoming an authorized user on a credit card account
It’s straightforward to add and remove authorized users, but there are risks involved, for the authorized user as well as the primary cardholder.
Most notably, the financial behavior of the cardholder will be reflected in your credit score—good and bad. For instance, if the primary cardholder misses a payment it could show up on your credit report, and, subsequently, reduce your credit score.
Experian says it does not report late payments on the authorized user’s credit report. Equifax and TransUnion may report both positive and negative items for authorized users.
There are other nuances. For example, if you are added as an authorized user and the primary cardholder doesn’t let you know the available balance on the card, your credit card could be declined.
Reasons to remove an authorized user
There may come a point when you need to cut ties with an authorized user on your account. You’ll know it’s time when having that authorized account feels more like a chore.
The decision to remove an authorized user tends to be a difficult one to make considering the person is likely a family member or friend. However, in order to protect your own finances, let’s consider some of the circumstances that warrant removing an authorized user.
- The cardholder is being financially reckless with the payments. When you add a family member or close friend as an authorized user, you must lay down boundaries to avoid bad habits. If their spending gets out of control, it’s time to remove them from the account.
- The authorized user is going over their credit limit. If the authorized user can’t respect the spending limit you’ve set? Time to take them off your account.
- The authorized user isn’t paying you for their charges on the account. As the primary cardholder, you are liable for any and all payments that are due at the end of each billing cycle. It is incredibly important to establish a payment plan with an authorized user to ensure their charges are paid for. If this becomes a hassle or the authorized user refuses to pay, it’s time to remove them.
- The authorized user’s credit has improved, now what? If the authorized user can now qualify for their own credit card, perhaps one with solid rewards and benefits, then mission accomplished! Time to let them move on.
How being an authorized user impacts your credit
Depending on the financial habits of the primary cardholder, becoming an authorized user can be good or bad. If the account holder makes payments on time and keeps balances low, your credit score can go up. That’s why becoming an authorized user is often recommended as a way for students, young adults, or those with a rocky credit history to begin rebuilding their credit.
On the other hand, if the primary cardholder regularly makes late payments, fully utilizes the cards balance or carries a large balance, the credit bureaus could use this information against the authorized user.
Late payments could show as derogatory marks on your Equifax and TransUnion credit reports. Your credit score could also suffer due to a high credit utilization ratio, which is the second most important factor in determining your credit score.
Remaining as an authorized user
If you don’t request to be taken off the account as an authorized user, you can still continue to use the card. Any activity won’t show up on your credit report.
It might be in your best interest to work with the cardholder and pay down the debt together—especially if you were responsible for some of the charges. You’re not legally obligated to make any payments, though, because the debt isn’t in your name.
The situation changes a little if you’re married to the primary cardholder. In community property states, the spouse is legally liable for debt incurred by a spouse during the marriage.
Community property states:
- New Mexico
*Note: Alaska is not recognized as a community property state but allows couples to opt into a community property relationship.
In other states, a non-signing spouse cannot be sued for debt.
How does the process differ for joint accounts
An alternative to adding an authorized user is opening a joint credit card account. In this instance, the application is joint and both individual’s credit scores, incomes and financial backgrounds are used to make the approval decision for the card. Plus, both parties are equally responsible for the balance on the card. Unfortunately, it’s not as easy to separate yourself from a joint credit card account, whether you are the primary user or a co-signer.
If you want to be removed from the account, you’ll have to call the credit card provider and be prepared to negotiate. If the other account holder would qualify for the card on their own, the credit card company may approve your request. If not, your only option is to pay off any outstanding debt and close the account. You remain liable for any payments and any activity will continue to be reflected on your credit reports.
The bottom line
Weigh the consequences carefully before entangling someone’s finances with your own. Becoming an authorized user can be a great way to build your credit, but you should understand your responsibilities and take action to protect your credit score if the other party is facing financial difficulties.