According to new research from Credit Knocks, 46.4% of credit card authorized users enjoy a 680+ credit score compared to 27.7% of non-authorized users with a 680+ credit score.
Overview of the Strategy – One little-known strategy in the credit improvement space is for individuals with bad credit to ask a friend or family member who has an established credit card account if they can be added to the account holder’s credit card as an “authorized user.” By doing so, many credit cards report the account’s payment history to the authorized user’s file at the credit bureaus. The strategy allows authorized users to “inherit” the benefits of the account into their own credit file, such as payment history, account age, and credit limit – all of which are factored into one’s credit score.
Impact of the Study – Some personal finance experts question if the authorized user strategy really works. The Credit Knocks study surveyed 570 U.S. adults ages 20 to 29 in April 2019 and found a direct correlation between people who had been added as authorized users and good credit scores. In some cases, the authorized user effect also trumped the impact of ethnicity, income, and education on the respondents’ credit scores. Of the respondents who had been added:
- Only 13% of authorized users had a credit score under 600, compared to 24.6% who had not been added
- 46.4% had a 680 or higher credit score, compared to 27.7% who weren’t added
- 27.5% had a 639 or lower credit score, compared to 39.9% who weren’t added
- 48.2% of all respondents had never heard of the strategy
- 21.6% of respondents had asked a friend or family member to add them
The Authorized User Effect on Minorities – It has been widely studied and reported that Black and Hispanic Americans’ credit scores are disproportionately lower, on average, than white and Asian Americans’ scores. However, the study shows that minorities who’d been added as an authorized user had higher credit scores than white Americans who had not been added, on average. For example:
- 52.4% of Black and Hispanic authorized users had a credit score of 680 or higher
- 30.5% of White and Asian non-users had a credit score of 680 or higher
The study showed a similar pattern of the authorized user’s effect on overcoming the barriers to good credit scores imposed by low income and low education.