How Authorized Users Work On Credit Accounts

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Maybe you are thinking about helping out another and add on an authorized user or maybe you are one of the people who are looking into becoming an authorized user, but are those really the best solutions? It is a serious commitment that too many times ends up with a lawsuit so you have to be very careful. It is something that can work though if all of the stars are aligned so to speak.

Authorized User vs. Joint Account Holders

There will be two options for sharing a credit card account and that will either be as an authorized user or a joint account holder. The liability for payments is going to differ immensely depending on which one you are. An authorized user will piggyback on the credit of a friend or family member and are entitled to use the credit, but will have no responsibility when it comes time to pay the bill.

Joint account holders will share responsibility and ownership of the account and thus will be liable when the payment comes. This must also be opened at the same time by both owners of the account.

When It Helps

As an authorized user with bad credit this could be a solution to help raise your credit score up with really no responsibility on your part. It is essentially all uphill from that point forward. This is commonly seen with parents adding their teenage children on as an easy way to help them get a good start with their credit score. In some cases the account holder is able to set up spending limits which just makes the process that much easier and better for everyone involved.

Keep in mind though if something negative happens to the account holder's credit, then the authorized user's credit will suffer as well. It can go either way so if you are an authorized user or planning to become one then you have to make sure the account holder has their finances in tip top shape and that you can trust them. They also have to trust you as well. While there are no financial obligations to pay the bill there have been many lawsuits filed when there have been excessive payments being placed by the authorized user.

When It Hurts

Joint account holders can be a very dangerous thing. It is great for married couples so that they can easily share the responsibility and both have full access to the account. If the relationship starts to hit some bumps in the road though that can great major problems. There will always be a risk in either situation though so be very careful and make sure it is someone that you trust very much.

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Do you meet the basic qualifications?

  • At least 1 year with current employer
  • A minimum income of $1,500 per month
  • No repossesions within the last year
  • Any bankruptcies must be discharged
  • Money down may be required, but not in all cases
  • Must be a current resident of the U.S. or Canada