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Understanding Authorized Users and Cosigners: A Guide by O1ne Mortgage

Qualifying for a credit card can be challenging if you have poor credit or little credit history. This can be a frustrating barrier to entry—especially if you want to use a credit card to improve your credit score. How do you get access to credit now so you can improve your credit more over time?

Two options to consider are finding a credit card cosigner or becoming an authorized user on another person’s account. Both offer the possibility of accessing credit and building your payment history. But beyond that, there are important differences to consider.

What Is an Authorized User?

An authorized user is someone who is added to a primary account holder’s credit card. Authorized users typically get their own credit card and can make charges on the account (assuming the primary cardholder agrees). This can help someone who would have a difficult time qualifying on their own get access to credit, and they may see improvements to their credit scores based on how the primary account holder manages the account.

While the authorized user can use the card for spending, the primary account holder maintains full legal responsibility for charges to the card, including any interest and fees accrued.

What Is a Cosigner?

A credit card cosigner is someone who applies for a card with another person and uses their own credit and income information to guarantee repayment of the debt. For borrowers with poor or no credit, finding a creditworthy family member or friend who’s willing to cosign for you could help you qualify.

A cosigner takes on legal responsibility for repayment if the primary account holder doesn’t make payments. Both parties are equally responsible for the debt, and both parties can face financial and credit consequences if the primary account holder fails to make payments.

Opening a credit card account with the help of a cosigner can be a way to begin establishing credit. Once you have access to a credit card or loan, responsibly managing your credit and making on-time payments can open the door to a higher score and more credit opportunities down the line. Unfortunately, credit card cosigning is becoming increasingly rare: Most major credit card issuers no longer allow it.

What’s the Difference Between a Cosigner and an Authorized User?

The biggest difference between a cosigner and an authorized user is who is responsible for repaying the debt. A cosigner is someone who takes on joint responsibility for repaying a debt. An authorized user, on the other hand, is someone who has their own physical credit card and access to an account, but isn’t responsible for repaying the balance.

Beyond that, credit card cosigners and authorized users differ in how each can impact your credit. Cosigners put their credit on the line to back an applicant, often one whose income and credit won’t allow them to qualify on their own.

How the credit account is managed will impact the cosigner and the primary account holder’s credit. If the primary account holder makes on-time payments and keeps the balance low, both parties could benefit; if the account holder misses payments or maxes out the card, both parties’ credit could suffer.

On the other hand, when someone adds you as an authorized user, they maintain full responsibility for any charges, including interest and fees, that either of you accrue on the card. As an authorized user, how negative information on the account impacts your credit depends on how a credit bureau factors this information in. Experian does not include missed payments on an authorized user’s credit report. On the other hand, a high balance on the card could impact the authorized user’s credit.

Last, keep in mind that most credit card companies allow authorized users to be added to credit cards, while credit card cosigners have become a rarity.

When Should You Become an Authorized User?

Becoming an authorized user could make sense as a strategy for building credit if someone financially responsible in your life agrees to add you to their card. For the best chance to see a benefit to your credit score, choose a loved one who you’re confident will make on-time payments and keep a low balance.

It can also make sense to become an authorized user if you have shared finances; many parents add their children to their credit cards to help them cover spending. Couples might also choose to add each other as authorized users as a way to share credit.

Even though authorized users have access to the card, the primary account holder is legally responsible for repaying the debt. It’s wise to have a candid conversation about how you’ll use the card and repay the primary account holder before you begin sharing credit.

When Should You Use a Cosigner?

While it could make sense to add a credit card cosigner if you’re worried about qualifying on your own, it’s difficult to find a credit card issuer that allows it today. Most major credit card issuers don’t allow you to add a cosigner.

Given that credit card cosigning may not be an option, consider other ways to qualify for a credit card with poor credit or a limited credit history. While becoming an authorized user is one possibility, you also may be able to qualify for a secured credit card on your own.

The Bottom Line

Like a cosigner on a loan, a credit card cosigner is someone who helps you qualify for credit by promising to repay what you owe in the event that you don’t pay. But, since most credit card companies don’t allow you to add a cosigner, this may not be a viable strategy.

On the other hand, becoming an authorized user is possible if you have someone in your life who’s willing to add you. But be cautious when taking this route. Sharing credit can add stress to a relationship, so it’s key to get on the same page about how you’ll use the card and repay your charges. And, to make sure you’re seeing improvements to your credit, be sure your loved one has a strong track record of responsibly managing debt before you ask to be added onto their card.

Finally, consider that, even with poor or little credit history, you may be able to qualify for a credit card on your own. While many unsecured credit cards require fair or good credit, secured credit cards often have no minimum credit score requirements. Opening and responsibly managing a secured credit card can help you build credit and graduate to an unsecured credit card down the line.

If you need assistance with your mortgage needs, O1ne Mortgage is here to help. Call us at 213-732-3074 for any mortgage service needs. Our team of experts is ready to guide you through the process and help you achieve your financial goals.

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