“Building Credit: Tips for Authorized Users”

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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. This is because being an authorized user does not require you to make payments, and creditors prefer to see evidence of your ability to repay debts and a stable income.

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 appear on their credit report and won’t contribute to their payment history.

If you already have some credit history, becoming an authorized user may still help, but the impact might be less significant. For instance, if you have high credit utilization, being added to a relative’s lightly used card with a high limit can lower your overall credit utilization, potentially improving your credit score.

How to Build Credit

While being an authorized user can give you a good start, it’s 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 certain number of payments.

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 small, manageable payments to ensure on-time payments.

Apply for a Store Credit Card

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

Take Out a Secured Loan, Such as a Car Loan

A loan secured by collateral, like a car loan, can help build your credit through on-time payments. Credit scoring models favor a mix of revolving credit (like credit cards) and installment loans (with fixed monthly payments).

Other Financial Habits to Build

In addition to using an authorized-user card responsibly, you can set yourself up for success by:

Create and Stick to a Budget

Knowing your income and expenses helps ensure your actions align with your values and that you have enough set aside for emergencies.

Keep Track of Your Finances

Monitor credit card balances online and set up alerts to avoid surprises and stay within your limits.

Sign Up for Experian Boost®

Experian Boost gives you credit for on-time utility, telecom, rent, and certain streaming service payments, potentially boosting your credit scores.

Check Your Credit Reports

Ensure your accounts and on-time payments are reported accurately. Understanding the relationship between your credit use and your scores can be beneficial. You can get your Experian credit report for free to track your progress.

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. Since authorized users are not responsible for payment, you’ll need to find other ways to demonstrate this.

Enhance your credit portfolio with a credit-builder loan, secured credit card, secured loan, or other credit products reported to the credit bureaus. You can also get a free credit score and report from Experian, updated daily to track your progress.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you with all your mortgage requirements.

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