Young Adults May Have Higher Credit Score after Becoming an Authorized User
Many parents are now adding children to their credit card accounts to build credit before reaching adulthood. In fact, 17% of preteens are authorized users on their parents’ accounts.
Being an authorized user can help teach children how to manage a credit card, and may also lead to a higher credit score in their 20’s. Credit Knocks recently surveyed a group of adults, ages 20 to 29. These adults who had been authorized users at a younger age had significantly higher credit scores than their counterparts.
Nearly half (46.4%) of authorized users had a credit score over 680, compared to just 27.7% who had never been an authorized user. On the lower end of the spectrum, only 13% of authorized users had scores below 600. That’s almost half of the 24.6% who were not authorized at a young age.
While this strategy is mostly utilized by parents, almost any cardholder can add another person onto their account as an authorized user. This includes friends, siblings and co-workers. Half of the survey participants (48.2%) had never heard of authorized card users, but another 21.6% had asked a friend or family member to be on their account.
Authorized users build credit from positive payment histories, just like primary cardholders. However, primary cardholders are held responsible for all payments. That means if a child spends $1,000 on their parent’s credit card account, the parent has to pay that back, regardless of the child’s contribution. If payments go into default, both credit scores will suffer.
If you are planning to add an authorized user to your account, be aware of these responsibilities. Many credit cards with authorized users will allow you to set spending limits for other cardholders on your account. There may be a small fee for each additional card on file, so be mindful of the costs before committing.