Will Adding Someone to Your Credit Card Hurt Your Credit Score?

Will Adding Someone to Your Credit Card Hurt Your Credit Score?

In my 30+ years helping buyers and sellers across the Phoenix metro area, I’ve seen credit questions come up at almost every stage of the home buying process. One I hear often: “I’m thinking of adding my spouse, child or parent to my credit card. Will that hurt my score?”

The short answer is that adding an authorized user doesn’t usually hurt your credit by itself. But how the account is managed afterward can make a real difference, especially if you’re planning to buy a home.

WHY IT’S USUALLY FINE

• Adding an authorized user typically doesn’t trigger a hard inquiry on your credit report.
• Your account history stays the same. If you’ve been paying on time and keeping balances low, that continues.

HOW IT CAN HURT YOU

Higher credit utilization. Utilization is the amount of your credit limit you’re using, and it’s one of the biggest factors in your score. If the authorized user charges a lot, your balance climbs relative to your limit. Keeping utilization under 30% is a common guideline, and lower is better.

Missed or late payments. As the primary cardholder, you’re responsible for the full balance. If a payment is late, it shows up on your credit report, not theirs.

Legal liability. You owe whatever gets charged to the card, even if the other person doesn’t pay you back.

HOW TO PROTECT YOURSELF

• Only add someone you trust with your spending.
• Ask your card issuer whether you can set a lower spending limit for the authorized user.
• Turn on balance and transaction alerts so nothing surprises you.
• Pay the balance in full, or close to it, every month.
• Remember that you can remove an authorized user if the arrangement stops working.

IT CAN HELP THE OTHER PERSON TOO

Many families add a son, daughter or spouse as an authorized user to help them build credit. When the issuer reports the account to the credit bureaus, its positive payment history may appear on that person’s credit report. Not every issuer reports authorized users, so it’s worth asking before you count on this.

WHY THIS MATTERS IF YOU’RE BUYING A HOME

Lenders look closely at your payment history and how much of your available credit you’re using. Big swings in card balances in the months before you apply for a mortgage can affect your score, and your score can affect your interest rate. If a mortgage is in your near future, it’s smart to keep balances low and avoid any surprises on your accounts.

If you’re thinking about buying or selling anywhere in the Phoenix metro area, I’m happy to talk through where you stand and connect you with trusted lenders who can review your credit and give you an accurate picture.

David Thomas, HomeSmart Realty