Credit Tradelines 101: How to Boost Your Credit Score by Getting Added as an Authorized User
Credit lines can be confusing, but you don’t have to know how they work in order to benefit from them. All you need to know is that adding yourself as an authorized user on another person’s credit card account will help boost your credit score almost instantly! However, you should be aware of how this process works and what it could mean for your financial future before you take the plunge, so keep reading to learn more about how credit tradelines work and how they can benefit you!
The History of Trade Lines
Authorized user tradelines have been around for a long time, but they’ve only become popular in recent years. Here’s a brief history of how they came to be and why you might want to get one.
What is an authorized user? An authorized user is someone who has permission from the cardholder (the account owner) to use the credit card and make purchases on it. They may also sometimes be called co-applicant.
Why would I want to do this? Adding yourself as an authorized user on your spouse or partner’s credit card can help boost your credit score if they have good credit. Having just one additional trade line will add 20 points or more to your FICO score because it decreases the percentage of your available credit that is not being used, which makes up 30% of your FICO score calculation. It also increases the total length of your credit history, which counts for 15% of your FICO score. You’ll need to ask the account holder about their credit limit and whether there are any other authorized users. Be sure to check their statements regularly so you know when payments are due, and try not to spend more than 50% of their limit. It may take 3-6 months before seeing results on your report, so keep that in mind before making a purchase with your new card!
The Advantages of Trade Lines
Adding trade lines to your credit file can be an effective way to boost your credit score. By becoming an authorized user on someone else’s account, you can piggyback off their good payment history and improve your own credit standing. Trade lines can also help you build a positive credit history if you don’t have one already. Here are some other advantages of trade lines -Trade lines will count towards your credit utilization ratio (although this is typically not much since the balance is usually low).
-If the person who added you has higher credit limits than you do, this can potentially give you access to more funds that would otherwise be unavailable to you.
-Trade lines may be reported differently depending on the type of trade line they are. For example, a bank card may only count toward 10% of your total available credit while a student loan or mortgage may count toward 100%.
-Some people believe that it is easier for lenders to identify how reliable borrowers will be when they have been added as an authorized user versus having just applied for their own loans.
The Drawbacks
There are a few drawbacks to this strategy, however. First, if the primary cardholder doesn’t make their payments on time, it will negatively impact your credit score. Second, you’re not technically responsible for the debt, so if the cardholder doesn’t pay it off, you could still be on the hook for damages. Third, some creditors may not report authorized user activity to the credit bureaus, which means your score might not increase as much as you’d like. Fourth, if the primary cardholder cancels the card or otherwise has their account closed, you’ll lose access to the tradeline and your score will take a hit. It’s important to have a plan in place before taking on this responsibility. It’s also worth noting that while you can be added as an authorized user even if you have poor credit, the trade-off is that your risk of being saddled with someone else’s debt is higher too. Finally, keep in mind that adding someone as an authorized user won’t necessarily help them build their own credit history – they’ll need to become a joint account holder (which involves more responsibility) for that to happen.
10 Things To Remember About Being An Authorized User
1. When you become an authorized user on someone else’s credit card, you are not liable for any debt on the card.
2. The account will show up on your credit report, and can help boost your credit score.
3. However, if the account is mismanaged, it could also lower your score.
4. As an authorized user, you’re entitled to all the same cardholder perks and protections as the primary cardholder.
5. You can usually be removed as an authorized user at any time by the primary cardholder.
6. Keep in mind that being an authorized user does not give you permission to spend freely on someone else’s credit card – only use it wisely! 7. Be sure to read the terms of agreement when signing up so you know what limitations there may be. 8. Check with the primary cardholder before using their credit card to make purchases from a store or online, and remember that unauthorized charges may appear on your statement even after you’ve been removed as an authorized user. 9. If someone wants to add you as an authorized user, find out whether they have a solid track record of good spending habits first – especially if they have bad credit themselves! 10.