Authorized Users vs. Cosigners: Key Differences and Benefits

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Understanding Authorized Users and Cosigners

At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding credit cards and mortgages. For any mortgage service needs, call us at 213-732-3074.

What Is an Authorized User?

An authorized user is someone added to a primary account holder’s credit card. Authorized users typically receive their own card and can make charges, provided the primary cardholder agrees. This can help individuals who struggle to qualify on their own gain access to credit and potentially improve their credit scores based on the primary account holder’s management of the account.

While authorized users can spend using the card, the primary account holder retains full legal responsibility for all charges, including interest and fees.

What Is a Cosigner?

A cosigner is someone who applies for a credit card with another person, using their own credit and income information to guarantee repayment of the debt. This can be beneficial for those with poor or no credit, as a creditworthy cosigner can help them qualify.

Cosigners share legal responsibility for repayment. Both the cosigner and the primary account holder are equally liable for the debt, and both can face financial and credit consequences if payments are missed.

Although opening a credit card account with a cosigner can help establish credit, it is becoming increasingly rare as most major credit card issuers no longer allow cosigners.

Differences Between a Cosigner and an Authorized User

The primary difference between a cosigner and an authorized user is the responsibility for repaying the debt. A cosigner shares joint responsibility for repayment, while an authorized user has access to the account but is not responsible for repaying the balance.

Cosigners put their credit on the line to back an applicant, impacting both parties’ credit based on how the account is managed. In contrast, authorized users benefit from the primary account holder’s management of the account, but their credit can be affected by high balances or missed payments.

Most credit card companies allow authorized users, while cosigners have become rare.

When to Become an Authorized User

Becoming an authorized user can be a good strategy for building credit if a financially responsible person agrees to add you to their card. Choose someone who makes on-time payments and maintains a low balance for the best chance of improving your credit score.

Authorized users can be beneficial in shared financial situations, such as parents adding children to their cards or couples sharing credit. However, the primary account holder remains legally responsible for the debt, so it’s important to discuss usage and repayment before sharing credit.

When to Use a Cosigner

While adding a cosigner can help you qualify for a credit card, it is difficult to find issuers that allow it today. Most major credit card companies do not permit cosigners.

If cosigning is not an option, consider other ways to qualify for a credit card with poor or limited credit history. Becoming an authorized user is one possibility, but you might also qualify for a secured credit card on your own.

The Bottom Line

Like a loan cosigner, a credit card cosigner helps you qualify for credit by promising to repay if you don’t. However, since most credit card companies don’t allow cosigners, this may not be a viable strategy.

Becoming an authorized user is possible if someone is willing to add you, but be cautious. Sharing credit can strain relationships, so ensure you and the primary account holder agree on usage and repayment. Ensure the primary account holder has a strong track record of managing debt before asking to be added to their card.

Even with poor or limited credit history, you may qualify for a credit card on your own. Secured credit cards often have no minimum credit score requirements and can help you build credit, eventually leading to an unsecured card. If this option suits your situation, O1ne Mortgage can assist you in finding secured credit cards matched to your credit profile. For any mortgage service needs, call us at 213-732-3074.

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