What are the risks of being an authorized user?

The Shadow of Shared Credit: Risks of Being an Authorized User

Adding an authorized user to a credit card can seem like a straightforward way to share financial responsibilities or to help someone build credit. However, this seemingly simple addition comes with potential risks that often go unnoticed. While the benefits exist, understanding the drawbacks is crucial before granting or accepting authorized user status.

One of the most significant concerns is the vulnerability to unexpected removal. Unlike a primary cardholder, an authorized user has no control over the account’s management. The primary cardholder can, at their discretion, remove you from the account, potentially severing your access to building credit. This lack of permanence can make it challenging to establish and maintain a positive credit history if the primary cardholder is less than diligent.

Furthermore, the authorized user’s creditworthiness is inextricably linked to the primary cardholder’s. Late payments, missed payments, or even the primary cardholder’s bankruptcy can negatively impact your credit score, even if you were unaware of the issue or hadn’t used the card yourself. This is a critical point to remember – your credit is not insulated from the financial choices of another person, even if you are only an authorized user.

The impact on your credit score can be considerable and long-lasting. Negative marks on a credit report, stemming from the primary cardholder’s actions, can take years to erase. This makes careful consideration of the primary cardholder’s financial responsibility paramount before agreeing to become an authorized user.

Finally, it’s essential to realize that your rights and liabilities are limited as an authorized user. You are not responsible for the outstanding balance on the card, but any negative reporting or penalty associated with the account may negatively impact your credit profile.

In conclusion, while the prospect of sharing credit responsibly may appear attractive, authorized users should be aware of the risks involved. The potential for abrupt removal and the direct impact on credit history due to the primary cardholder’s actions necessitate a cautious approach to accepting or granting authorized user status. Thoroughly evaluate the primary cardholder’s financial stability and understand the potential ramifications before making a decision.