What’s The Difference Between an Authorized User and a Joint Account Holder?

After Lauren and I joined our finances, next up were the credit cards. Lauren was pretty excited to have access to my credit, and I was happy to have someone legally responsible for our monthly credit card balance. Right?

I called up our credit card companies and ask to add Lauren to my account. I received the same question from each of them:

Would you like to add your wife as an authorized user or as a joint account holder?

What exactly is the difference? And which one was best for us? This decision can have a big impact on both partners credit report and credit scores.

Authorized User

  • An authorized user can use the account to make purchases but does not share any of the financial responsibility to pay off the card.

Valid authorized users have their data sent to be used in credit reports and calculated in FICO’s credit score. A few years ago, they made changes to their scoring algorithm to only authorized users whom they deemed to be legitimate. Some people were ‘piggybacking’ on account holders that they had no relationship with (very often, a company that charged customers to boost credit scores) to improve their credit scores and increase their credit age.

How does FICO determine who is a legitimate authorized user and who is illegitimate user? Legitimate users include spouses, children, and parents, along with anyone who would have a legitimate reason to share access with the primary account holder.

I have been an authorized user on my parent’s credit card for several years, so my credit age is actually older than I am!

Joint Account Holder

  • A joint account holder is equally responsible for the balance of an account and is legally liable for an amount due.
This means that if one person does not make a payment, it affects both people. So if I missed a payment for some reason, Lauren would also feel the pain of a missed payment. Therefore, you should only be added as an joint account holder if you are prepared to be responsible for paying the card yourself. Otherwise, your credit could be negatively affected should the account not be paid.

Either Options Is Good

It’s important to note that the entire history of the account will be sent to the credit bureaus. That means that the last 3+ years of positive history on my credit cards will be shared with Lauren. Score!
Since the credit score calculation would only improve Lauren’s credit score by increasing her credit limits, pushing down her credit utilization rate, and improving her credit history, we definitely wanted Lauren to be included on this account. But whether we added her as an authorized user or a joint account holder, she would receive all of these benefits.
We’ve already merged our bank accounts, and we’ve started paying off her student loans, too. Having her added as an authorized user felt too much like me paying her credit card bill and we really like the idea of being equal partners, so why not have her be liable for our debt, too? We decided on adding her as joint account holder, we are true partners, both in our earnings and in our spending.

For us, there were only positives to adding Lauren as a joint account holder. If this account wasn’t one that was paid off each month or if Lauren already had several credit cards, we probably would not have added Lauren so that it would not negatively impact her credit score or credit report.

6 Responses to What’s The Difference Between an Authorized User and a Joint Account Holder?

  1. Michelle says:

    I’ve wondered the difference as well. Great post!

  2. J Ascher says:

    This is very good advice! Just be careful before entering into either type of arrangement. I got burned once when my partner opened a joint account in our names.

  3. When we were considering getting a joint or authorized user, they said that the join could tie our credit scores together. Since my wife has a really high credit score, we didn’t want to risk lowering her score a little bit at the cost of boosting mine a bit. Mine is still a good score, but not over 800. We figured in applying for a loan later it would help us more to keep hers as high as possible.

  4. John says:

    It would be rather scary to have an irresponsible authorized user on the account! Something people should be careful about!

  5. Crystal @ Prairie Ecothrifter says:

    We are joint account holders on everything just so there is no huge pause on anything if one of us dies. Plus we both wanted our credit to build up together. But overall, I doubt it will matter long-term.

  6. SB @ One Cent at a Time says:

    Authorized user, joint account holder and beneficiary, I consider these three as must have’s for every family.

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