Does being a secondary account holder affect credit score?

The Secondary Account Holder Conundrum: Does it Affect Your Credit Score?

The allure of adding your name to a loved one’s credit card account, perhaps to share expenses or build credit, is understandable. However, the impact on your personal credit score is often misunderstood. Contrary to popular belief, being an authorized user – the common term for a secondary account holder on a credit card – doesn’t directly add or subtract from your credit history. Your credit report won’t magically display this account as a separate line item.

This doesn’t mean it’s entirely irrelevant to your creditworthiness. The relationship is indirect, subtle, and often depends on the primary account holder’s behavior.

The Myth of Automatic Credit Improvement: Many believe simply being listed as an authorized user instantly boosts their credit score. This is a misconception. While the positive payment history of the primary account holder can indirectly help, it won’t show up on your report as your own activity. Credit bureaus don’t see you as having actively managed that account. You won’t gain credit age or build a history of responsible account management solely through authorization.

The Potential for Indirect Negative Impact: While you won’t be penalized for the primary account holder’s late payments or defaults, there’s one crucial area where your credit score could be negatively impacted: credit utilization.

Credit utilization refers to the percentage of your available credit that you’re currently using. Lenders view high credit utilization (generally above 30%) as a risk factor. Now, as an authorized user, your spending isn’t directly reported on your credit report. However, if the primary account holder runs up a high balance relative to the available credit on the card, that high utilization ratio could be reported and negatively affect the primary cardholder’s credit score. This, in turn, could indirectly influence any future joint applications you might make with this individual. Essentially, their poor credit habits could become a reflection on you in joint applications.

The Bottom Line: Being an authorized user doesn’t magically improve your credit score. It offers no direct benefit to your credit history. The potential for indirect negative impact through high credit utilization on the primary account exists, though this is rarely a significant factor. Therefore, if your primary goal is building credit, consider applying for your own secured credit card or a credit-builder loan, which directly reflects your own financial responsibility on your credit report. Adding your name to an existing account should be viewed as a potential aid in joint financial management, not a shortcut to better credit.