Paying down your credit cards and letting your credit mature are guaranteed to raise your credit score. But the boosting benefits can feel painfully slow.
Five years ago, my credit score hung at 550 and my apartment lease renewal loomed around the corner. I would stay up late plugging scenario after scenario into a FICO score simulator, hoping I’d find some secret formula that would catapult my credit into a healthy range. I was demoralized to discover that even if I spent the next two years paying off my balances, my score would barely break 600.
What people don’t tell you is that the options presented to you in most FICO score simulators are not your only options. In fact, one of the most powerful ways to boost your credit score is rarely listed.
If you need to significantly raise your credit score in the next three to six months, becoming an authorized user can skyrocket your score. In this article, I’ll walk you through what this is and what kinds of impact you can expect.
What Is an Authorized User?
An authorized user is someone who has been given permission to use a credit card by the primary card owner. This could be a parent, a relative, a partner or a friend. The important thing is that the credit card you’re being authorized to use has:
- A high credit limit (Ideally $10,000+)
- Several years of continuous on-time payments
- Little to no carry-over balance each billing cycle
If you’re already thinking, “Who would just give me permission to use their credit card?” I want to emphasize that you won’t need to use this credit card to reap the benefits. When a primary card holder adds you as an authorized user on their account, they will be sent a duplicate credit card in your name. For all it matters, they can hold on to this card, or cut it up. Your credit score will still benefit.
To understand why becoming an authorized user is such a powerful credit-boosting strategy, it’s helpful to first understand what makes up your credit score.
The two largest factors in your credit score are payment history and credit utilization (amount you owe).
Many of us damage our credit by paying late, carrying over balances, and using more than 30% of our credit limit. But when you’re added as an authorized user, you inherit years of good payment history and a large credit limit – which will help lower your overall credit utilization.
For example, let’s say you currently have four credit cards with a combined credit limit of $20,000. You have $10,000 in debt spread across those cards, putting your overall credit utilization at 50%. Now let’s say someone adds you as an authorized user to their credit card with a $30,000 limit. You just boosted your credit limit to $50,000, and dropped your total credit utilization to a healthy 20% overnight.
So what kind of impact can you expect? According to a 2018 survey conducted by Credit Sesame, becoming an authorized user can boost your score by 10% within one month and as much as 30% over 12 months.
When asking a loved one if they would consider adding you as an authorized user, it’s important to clarify the risk on their end. While this favor can have an enormously positive impact on your credit, it poses almost zero risk to their credit. The primary card holder will not inherit any of your credit history by assigning you as an authorized user.
It’s worth noting though that the credit card company will hold the primary account holder responsible for paying all charges on the account, so you will want to avoid using the card yourself. This reassurance upfront that they can keep or throw away the secondary card when it arrives might offer them some reassurance as well.
Lastly, you should be aware of the risks on your end, and choose wisely. If you’re added as an authorized user to a card that has more than 25% credit utilization, or is paid late, this strategy could hurt your credit more than help. When asking for this favor, be upfront about the criteria (high credit limit, several years of continuous on-time payments, and paid off or nearly so every month).
A Winning Formula
Becoming an authorized user is one of the fastest ways to boost your credit without having to pay off more of your debt. If you’re looking to supercharge this strategy even more, we’d recommend combining it with your own secured credit card – which helped one of our authors boost her FICO score by 125 points in 6 months.