When Rebuilding Credit, What's the Difference Between an Authorized User and a Joint Cardholder?

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When you come out of bankruptcy, as soon as you have your discharge in hand, it’s time to start rebuilding your credit. For most consumers, the starting point is a secured credit card that you use responsibly. But there are also the options of being an authorized user or a joint cardholder with someone else to help improve your credit. Each comes with different responsibilities and repercussions, so be careful before pursuing either of these options.

Two cards, two users, but one set of financing

With both authorized users and joint cardholders, both parties can make purchases with the credit card. There is one statement issued to the primary cardholder, the balance is made up of purchases from both cards, and both are subject to the same credit limit. The credit card history is reported on both credit reports, regardless of who made the payment or purchases using the card. But from there, the two diverge.

The differences between a joint cardholder and an authorized user rest mostly on the obligation and permissions.

Who’s responsible for the balance owed?

The significant difference between an authorized user and a joint cardholder is the responsibility for the credit balance. As an authorized user, you have no obligation to pay the credit balance. This means that the card issuer can’t go after an authorized user if there is outstanding credit card debt.

When someone is added as an authorized user on an account, hopefully, they’re a good credit risk who will pay the bills on time and not abuse the privilege. As an authorized user on an account in good standing, you can see a boost to your credit score. But if the person who owns the account doesn’t keep it up as they should, it could drop your credit score.

On the other hand, a joint cardholder is legally responsible for paying the credit balance as much so as the other cardholder. In cases of default, the credit card issuer can go after both. The activity on the jointly held card will be reported on your credit report and can boost your score so long as the account is managed wisely, payments are made on time, and you don’t max out the card.

How are joint and authorized user accounts created?

A primary difference lies in how the accounts are established. As an authorized user, you are added to an account that someone else already opened. As a joint cardholder, you and someone else open an account together. An authorized user can be added to a credit card account at any time or taken off an account at any time. An authorized user isn’t usually subjected to a credit check.

The primary account holder simply requests to add you and a card will be sent out in your name and the card activity should begin showing up on your credit report in a short while. With a joint credit card, the two users apply for the card together. Both credit scores will be checked to see if they qualify, and if approved, both joint cardholders will be issued cards.

If your credit score is inadequate to get approved for an unsecured card, which is the usual case after bankruptcy, applying with someone who has a solid credit history for a joint account can fast-track you to approval. Joint cardholders share the risk together unlike with an authorized user.

Removing card users

Another difference between an authorized user and a joint cardholder is how easily they can be removed from the account. With a joint cardholder, issues arise when the relationship between the two account holders end. You can’t just remove a joint cardholder because the account is owned by both. This is more complicated.

For an authorized card user, the primary account holder can take someone off the card with a simple phone call. Since the authorized user doesn’t have a legal obligation for the card, they can be easily removed. If you’re removed as an authorized user, the card activity will stop being reported on your credit report.

Rebuilding your credit with plastic

After bankruptcy, credit cards are the easiest way to start re-establishing your credit score. A few months after your bankruptcy discharge, you should be able to start exploring secured card options and maybe even unsecured depending on your credit score. If you wait for a month or two after discharge, you can start working on your credit without any assistance from a joint cardholder or someone willing to add you to their account.

It’s important that you start rebuilding your credit as soon as you get your discharge. If you’re not sure where to start, check out Credit Score Keys to get you on the right path to recovering your financial footing.

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