WalletPrep

PrintBack to the lesson

WalletPrep worksheet · Credit

Does being an authorized user build credit?

Name ____________________ Date __________

Key ideas

  1. You usually don't owe the bill. The person who opened the account must pay it. An authorized user generally does not, unless they also signed for the debt.
  2. The card's whole history can show up. Once you're added, the account's past can appear on your report, including years of on-time payments made before you joined.
  3. Their mistakes can become your problem. A late payment or a maxed-out balance on that card can show on your report and pull your score down.

Vocabulary

Authorized user
Someone a credit cardholder adds to their account so they can use the card. An authorized user generally doesn't owe the bill.
Credit report
A record of your credit accounts, payments, balances and some public records, kept by each of the three credit bureaus.
Credit score
A 3-digit number, usually from 300 to 850, that predicts how likely you are to repay debt on time. Lenders use it to set rates.
Credit bureau
A company that collects your credit history and sells reports to lenders. The three nationwide bureaus are Equifax, Experian and TransUnion.
Credit utilization
How much of your available credit card limit you are using, shown as a percentage. Lower utilization usually helps your score.
Collections
When an unpaid debt is handed or sold to a debt collector after missed payments. It can hurt your credit score.

Work it out

Ana has one secured card with a $500 limit and a $150 balance. Her dad adds her to his old card, which has a $9,500 limit and a $300 balance.

  1. Ana's card limit
  2. Dad's card limit
  3. Total limits
  4. Ana's card balance
  5. Dad's card balance
  6. Total balances
  7. Utilization before
  8. Utilization after

Check yourself

  1. Who is generally responsible for paying a credit card bill when there is an authorized user?

    • A. The authorized user
    • B. The primary cardholder
    • C. Both people equally
    • D. Whoever made the most charges

  2. You have a $1,000 limit with a $300 balance. You're added to a card with a $4,000 limit and a $200 balance. What is your overall utilization?

    • A. 30%
    • B. 20%
    • C. 10%
    • D. 5%

  3. The card you're on starts showing late payments. What should you do?

    • A. Nothing, it can't affect you
    • B. Pay the bill yourself to keep it
    • C. Ask to be removed and check your reports

Your turn

If you have little or no credit, ask one person you trust whether they have an old card with on-time payments and a low balance. If they agree, have them call the issuer, ask whether it reports authorized users, and add you.

www.walletprep.com/learn/authorized-user/ · Free to print, copy and share for non-commercial classroom use.

Answer key

Does being an authorized user build credit?

Work it out

  1. Ana's card limit$500
  2. Dad's card limit$9,500
  3. Total limits= $10,000
  4. Ana's card balance$150
  5. Dad's card balance$300
  6. Total balances= $450
  7. Utilization before30%
  8. Utilization after4.50%
  1. Before, Ana uses $150 ÷ $500 = 30% of her credit.
  2. After she's added, her total limits are $500 + $9,500 = $10,000 and her balances are $150 + $300 = $450. That's $450 ÷ $10,000 = 4.5%.
  3. If her dad ran his card up to $8,000, her total would be $8,150 ÷ $10,000 = 81.5%, which would likely hurt her score instead.

Check yourself

  1. B. The primary cardholder The primary cardholder signed the agreement and owes the balance. An authorized user generally does not, unless they also signed for the debt.
  2. C. 10% Balances are $300 + $200 = $500. Limits are $1,000 + $4,000 = $5,000. $500 ÷ $5,000 = 10%.
  3. C. Ask to be removed and check your reports Late payments on the account can show on your report. Ask the card company to remove you and stop reporting it, then confirm on your free reports.