Improving your credit is one of those things on everyone’s minds. Sometimes, people look for quick and efficient means of improving this score. Many have been helped by the strategy known as becoming an authorized user on someone else’s credit card account. This is done by putting a person on a credit card account to avail of benefits from the account owner’s history of reasonable payments through that credit card. These are called authorized user tradelines and, if used well, can add significantly to one’s score.
But how exactly does an authorized user tradeline work, and why is it so successful? In this blog, we are going to write about what the concept of an authorized-user tradeline is. So, let’s dive deep into how it works, its benefits, and what you have to consider when using them.
What is an Authorized User Tradeline?
Another is an authorized user, who is an individual who adds to his credit card account. However, an authorized user would not be legally liable for the debt. That means the primary cardholder allows the authorized user to access the credit line and have a history while still having no access to the card.
For all this, in return, keep in mind that since you are an authorized user, there’s little incentive to start paying against the card: you don’t own the debt since the card’s primary can pay instead, and neither do you enjoy all the rewards that are accrued in the first place as a result of being a principal cardholder, which in turn may consist of, amongst other things, accrued rewards or ownership of the entire account.
Authorized user tradelines on how to build credit
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Improved Payment History: Another factor that contributes to composing your credit score is your payment history. You inherit being an authorized user on that record if you are added with a history of reasonable on-time payments with accounts. Even if you have not used and/or paid for the card, your report will reflect on-time payments by the principal cardholder for your account, which will boost your score significantly, even when your credit history is scant or inadequate.
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Reduced Credit Utilization Ratio: The smaller the ratio, the more likely you are to handle your credit wisely. This is important in case you can include other credit cards with higher limits but a lower balance. For instance, if your credit cards have $2,000 limits but were included on a card with a limit of $10,000, and the balance is very low, the utilization ratio will drop, which might be better for your credit score.
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Further Credit History Length Boost: Another critical factor in calculating your credit score is the age of your credit accounts. Credit scores go further with older accounts, showing your capacity to manage credit over time. This raises the average age of your credit accounts. If you are added to a credit card account that has been opened for many years. This can benefit you if you’re a relatively new credit user and don’t have much of a credit history.
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Better Credit Mix: This credit scoring model checks if your accounts are diverse. You will be rewarded if you have different types of credit. It will include having more credit cards, loans, and installment accounts. Becoming an authorized user on a credit card account will introduce you to a new type of credit that boosts your score if you have a low credit portfolio.
Who Should Consider Using Authorized User Tradelines?
Authorized user tradelines have been in the game, boosting credit for decades, but not everyone can enjoy this practice. Here are a few cases whereby an authorized user would be handy
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Bad or No Credit History
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An Accelerated Increase Credit Score
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Parents Assisting Children With a Tiny Credit Report
Although some benefits seem to come with authorized user tradelines, here are a few things one should know:
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Missed or late payments will impact both credit scores. These unauthorized users have no access to the account. Thus, there is no way they can control the credit.
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Avoid purchasing authorized user accounts directly from third-party providers.
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Whereas an authorized user tradeline should form part of a bigger plan to maintain and build up your credit over time, using it without good credit habits will not yield long-term benefits.
Conclusion
Authorized user tradelines can be quite an effective tool in enhancing one’s credit score by using someone else’s good credit account history. They are good options for improving your credit repayment history, minimizing credit utilization, and contributing to a more extended credit profile. However, how it is done must be approached very cautiously, and risks must be considered while working with third parties. If appropriately used, authorized user tradelines could be an excellent and legitimate method to enhance your credit and reach your financial goals.
