If you are trying to build or rebuild your credit, obtaining a credit card can be the best way to increase your score. However, if you do not have a solid credit history, it may be difficult to get approved for a card. It’s a paradox. How can you build good enough credit to get a card without a credit card?
One possible solution can be to become an authorized user on someone else’s account. The way the credit scoring formula works, your friend or family member’s good credit can “rub off” on you, which can help those with a poor or limited credit history increase their credit score. The downside is that not all credit card issuers will bump up an authorized user’s credit.
Improving your score as an authorized user
If you want to improve your credit by becoming an authorized user on another’s account, you will need to know that person’s credit score. Not only do you want to ask for help from someone with a high credit score, you also want to make sure the individual makes all of his or her payments on-time. This does not only apply to the card for which you are an authorized user but all of that person’s open accounts, including the mortgage, car loan and other credit cards.
Once your score has risen as an authorized user, you can apply for a credit card in your own name. At that point, you will want to be removed as an authorized user from your friend or family member’s account. You will not want to put your own credit at risk if that individual’s credit status changes. Plus, you will be able to strengthen your credit even faster as the primary cardholder of your own account, so you will not need to be an authorized user on their card.
Know which cards help authorized users
As mentioned earlier, to see the credit benefits of becoming an authorized user, you must first ensure the credit card account in question will actually help raise your score. To help you, a card issuer must ask for the Social Security number of the authorized user. If they do not have your number on file, there is no way they can report the information to the credit bureaus.
Here is a list of cards that will help authorized users:
Barclaycard Rewards MasterCard
The Barclaycard Rewards MasterCard is a product designed for consumers with average credit, and it is also beneficial for authorized users. The card, which requires no annual fee, offers one point per dollar spent on most purchases and double points for every dollar spent on utilities, groceries and gas. When the cardholder adds you as an authorized user, make sure he or she provides your Social Security number to the card issuer.
Capital One Platinum
Capital One has few requirements to be approved for an account, and it requires a Social Security number to add an authorized user, which makes it a good option for those attempting to improve their credit. The Capital One Platinum card is available for users with fair credit, and it carries a number of perks, including the Capital One Credit Tracker. This offers cardholders a free credit score report, and a simulator tool that allows you to see how a number of credit decisions will affect your score. Cardholders will also be given a higher line of credit after making five monthly payments on-time. There are also no annual or foreign transaction fees.
Citi ThankYou Preferred
The Citi ThankYou Preferred card offers a number of rewards and benefits to those who have excellent credit. New cardmembers can receive 15 months of interest-free financing on new purchases and balance transfers. The only cost is a 3% balance transfer fee. There is no annual fee for the card, and cardholders will earn one point per dollar on most purchases and double points on entertainment and at restaurants. If you are added as an authorized user to someone’s Citi ThankYou Preferred card, make sure they provide your Social Security number, so you see the benefits to your credit score.
Blue Cash Everyday from American Express
The Blue Cash Everyday card works a bit differently from the others listed. It requires a Social Security number for all authorized users, and each authorized user is given their own card with a unique number. It is unclear whether or not having a separate card will give your credit score an extra boost, but it does make it easier for the account holder to track an authorized user’s spending. Authorized users can also create their own online account profile and link their card to it–even though they are not the primary cardholder. This feature allows American Express to send authorized users pre-approval offers, which will further increase their credit scores.
The American Express Blue Cash Everyday card has no annual fee and offers a number of rewards. New cardholders receive a $100 statement credit if they spend $1,000 within three months of opening their account. Cardmembers also receive 3% cash back at grocery stores (up to $6,000 in purchases per year), 2% cash back at gas stations and select departments stores and 1% on all other purchases. Additionally, new accounts receive 12 months of interest-free financing on new purchases and balance transfers (there is a 3% balance transfer fee).
By researching which credit cards will help authorized users increase their credit score, you can choose the best option.