Definition
An authorized user is an individual that is granted access to an account holder’s account privileges.
Analysis
A cardholder may, at their discretion, allow another individual access to their account. The primary cardholder(s), whcih would include both the primary applicant and any co-applicant, would still retain ownership control and full legal liability over the use of the account.
An authorized user does not have to repay debt incurred on a credit account, even though there may be an understanding between primary cardholders and authorized users that requires repayment. If the account should go into default, the creditor may pursue repayment from the primary cardholders, but it will not seek repayment from authorized users.
An authorized user gains no credit history for the account. Credit bureaus do not include any credit account in the individual’s credit history based on authorized user status.
Prior to 2007, the owner of a seasoned credit account could boost the credit score of another individual by granting authorized user status. This practice was very common in family situations.
Parents could help a child establish an initial credit account. A spouse could help the other spouse gain credit by granting authorized user status.
In 2005, a phenomenon known as piggybacking began gaining favor. This practice occured primarily among mortgage applicants due to the relatively high cost of the service.
Mortgage applicants could artificially increase their credit scores to receive lower mortgage rates. Credit bureaus phased out authorized user status in credit scoring formulas to meet the demands of major mortgage providers beginning in September 2007.
