Background and context

In my 15+ years advising clients on credit and lending, I’ve seen both strategies used to help young people or thin-file borrowers qualify for credit. Co-signing is a legally binding commitment: if the primary borrower misses payments, the co-signer must pay. Adding an authorized user is often used to help someone build credit quickly without signing a loan—but it isn’t risk-free for the person who controls the account.

How each option works

  • Co-signer: When you co-sign a loan (auto, personal, private student loan, or mortgage), you sign the credit contract and accept joint responsibility. The loan appears on both borrowers’ credit reports. Lenders treat co-signers as equally responsible; missed payments, defaults, or collections can lower the co-signer’s credit scores and lead to collection actions. (See lender-specific co-signer release options for possible exit strategies.)

  • Authorized user: An authorized user is added to a credit card account so they can make purchases using the card. The issuer reports the account’s history as an authorized-user tradeline to the credit bureaus in many cases, which can help the authorized user’s score if the account has on-time payments and low utilization. The authorized user usually has no legal obligation to repay the debt—the primary account holder is responsible.

Real-world examples

  • Co-signing a car loan: A parent co-signs because the young driver has limited credit. If the child stops making payments, the creditor will pursue the parent and report delinquencies on the parent’s credit report.

  • Adding an authorized user: A credit-card holder adds an adult child as an authorized user to a long-standing card with a 2% utilization and 10 years of on-time payments. The child’s score may rise because of the positive tradeline; however, if the primary cardholder later maxes the card or misses payments, the child’s score could suffer indirectly.

Who is affected and when it’s used

  • Co-signing is common when the borrower has weak or nonexistent credit or insufficient income for loan approval. Lenders use co-signers to mitigate risk.
  • Authorized-user additions are often used within families to help teenagers, students, or someone rebuilding credit. Issuers generally let the primary cardholder add trusted users at any age, though policies vary by bank.

Key differences at a glance

Aspect Co-signing Authorized User
Legal liability Yes — joint obligation for repayment No — primary account holder is legally liable (except in rare state contract cases)
Credit reporting Account typically appears on both parties’ credit reports Account may appear as an authorized-user tradeline on the user’s report if the issuer reports it
Use of account Not automatically permitted—co-signer may not have card access unless issued Authorized user can use the card for purchases (issuer controls card issuance)
Effect of missed payments Direct negative impact on co-signer’s credit and potential collections Negative payment history and high utilization can still harm the authorized user’s credit if reported
Removal Usually requires lender approval or loan refinance Primary account holder can often remove an authorized user through card issuer

Practical tips and strategies

  1. Run a worst-case scenario: Before co-signing, assume the borrower stops paying and check how a missed payment would affect your debt-to-income ratio and credit scores.
  2. Ask about reporting: If adding an authorized user to help build credit, confirm with the issuer whether they report authorized-user tradelines to the three major bureaus. Some issuers do, some don’t. (See our guide on how authorized-user tradelines impact credit.)
  3. Consider a co-signer release: For certain loans, lenders may offer a co-signer release after a period of on-time payments; ask about the requirements up front. (See our article on how co-signer release works.)
  4. Set account rules: If you add an authorized user, set clear spending limits, alerts, and card controls. If you co-sign, document repayment expectations and consider a written agreement between parties.

Common mistakes and misconceptions

  • Misconception: Co-signing always boosts the borrower’s credit. Reality: Co-signing improves approval odds but can cause major damage to the co-signer’s credit if payments lapse.
  • Misconception: Authorized users are completely risk-free. Reality: Because authorized-user tradelines can be reported, high utilization or delinquencies on the primary account can still affect the authorized user’s score.

Frequently asked questions

Q: Can I be removed as a co-signer?
A: Not without lender approval—typical options are refinancing the loan into the primary borrower’s name, a formal co-signer release (if the lender offers one), or paying the loan off early.

Q: Will adding an authorized user always help their credit?
A: No. Benefit depends on whether the issuer reports the tradeline and on the account’s payment history and utilization.

Q: If the primary account holder dies, who is responsible?
A: For co-signed loans, the co-signer remains legally responsible. For credit cards, the card issuer typically pursues the primary account’s estate; authorized users are not liable for the account balance but may lose access to the card.

In-practice advice

In my practice I recommend treating co-signing as if you were taking on the loan yourself—run numbers, get terms in writing, and consider securer alternatives (cosigner release clauses, lower loan amounts, or guaranteed student loans like a Parent PLUS only when necessary). When using authorized-user strategies to build credit, prefer older cards with low utilization and long on-time histories and confirm the issuer reports tradelines.

Professional disclaimer

This article is educational and not personalized legal or financial advice. Check your contract terms and consult a qualified attorney or financial advisor for decisions that affect your legal liability or tax situation.

Authoritative sources