When you have a credit card, you’ll have to keep an eye out for your credit score as well. A credit score will tell you how good your spending habits are and if you’re a financially responsible person. However, it can be a little more difficult if you don’t already own a credit card. There are many ways you’re able to improve your credit score.
Read below to find out what you can do to build your credit score.
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Become an Authorized User on a Credit Card
An authorized user is a person that’s included onto an account of someone that already has a credit card. In other words, all of the credit information will be reported back to the credit bureaus with your name. This will help you build credit while you don’t own your own credit card.
Several reasons why you should be an authorized user is:
- When you’re an authorized user, it will help you build up your credit score.
- You will immediately get a credit history.
- You’re not responsible for the primary account holders activity on the card.
- The account holder will not be affected by the authorized user’s own credit history.
There are some good reasons as to why it’s not a bad idea to be an authorized user. Plus, there are several perks that comes with being one as well.
How Does it Affect Your Credit Score?
Before you add an authorized user onto your credit card account, be sure you know what it comes with.
- You the account holder will take full responsibility for the account. The authorized user will not be liable for the balance on the account. You must make sure that the account is paid for.
- Potentially damaging an authorized user’s credit score. With that said, you can hurt the credit score of the user if you’re not careful. For example, if you max out your card for fall behind on payment, you can damage their score with yours.
There are several risks that comes with adding another person onto your account. Keep in mind that you will be mostly responsible for the account and managing the card.
Pointers for Authorizing a User
Understanding what comes with adding someone onto your credit card account will be very beneficial for you. This way, you’re able to come up with a plan for the both of you to share the account.
- Have a payment plan. There are several options you can consider like setting up a reimbursement schedule. Just have the authorized user pay you directly and you can use that money to pay the bill. Or, you can trust the authorized user to have online access to pay for their transactions.
- Use an account that’s easy to manage. Credit cards all come with a specific limitation and high penalty rates that can be too risky. If the both of you cannot manage an account together, it can damage both of your credit scores. A good credit card option is one that you’ve had open for several years and a smaller balance limitation. A good payment history wouldn’t hurt either.
- Letting an authorized user by proxy. You’ll be able to add a person onto your account so they can make use of it passively. Just add their name as an authorized user to improve their credit score. Furthermore, this doesn’t necessarily mean you’re granting access to have a card to to put transactions on it.
- Don’t stay too long. Becoming an authorized user on someones account means you’re able to build your credit score. However, it means that you’re serious about your credit report and plan on opening your own account someday. So once you’ve spent a decent amount of time on their account, consider opening your own account.
- Going from being an authorized user to an official cardholder. Basically, an authorized user is like a cardholder in training. Once you’ve gotten experience with credit card accounts, you’ll be able to open your own in no time. However, keep in mind it comes with more responsibilities than an authorized user has.
Plus, this will help if you and the person you’re sharing an account with have good communication skills. This helps sort out how the both of you want the account to be managed.
Conclusion
Building your credit score can be difficult. However, if you become an authorized user on someones account, you’ll be able to build up your score in no time. Obviously, you must practice managing an account and transactions with the primary account holder. Additionally, starting off as an authorized user acts like training for when you open your own credit card account someday. Lastly, keep in mind that there are plans you must work out with the other person to handle the account without damaging your scores.
