It's possible for consumers to share credit accounts. Both people have access to the account information and both can use the account when making purchases. Two common ways to share an account include opening a joint account and being an authorized user on an account.
Definition of Joint Account Holder
Joint account holders refer to two or more people who share an account and who are equally responsible for the account. This includes being responsible for the timely payment of the account and for the balance. If applying for a joint account with someone, you will have to complete an application and include the personal information of all applicants. Personal information includes name, address, Social Security number and income information. Lenders review the credit and income history of all applicants and base approval on their findings.
Definition of Authorized User
An authorized user on an account is also someone who can access the account. But unlike a joint account holder, this individual doesn't have to apply for the account. The primary account holder submits an application along with his personal information, and creditors then base approval on his information only. Once the primary account holder is approved, he can then contact his creditor to add someone's name to the account as an authorized user. This person can use the account, but he isn't responsible for paying the balance.
Removal of Names
Another difference between joint accounts and authorized user accounts is the way a name is taken off the account. With joint accounts, the account is in both parties' names and both people signed a contract with the bank. The bank will not remove one person's name because both are responsible for the debt. Getting a name off a joint account involves refinancing a loan, or paying off a credit card and then closing the account. Primary account holders can remove an authorized user by contacting their creditor.
Purpose of Accounts
People typically apply for joint accounts if they need two credit scores or combined incomes to qualify for financing. Joint accounts are common with mortgage loans and auto loans. Lenders take the average of both credit histories and the total of both incomes to determine affordability and interest rates. With authorized user accounts, this type of arrangement can help someone who's trying to establish credit. Once an authorized user's name is added to the account, this account becomes visible on his credit report. And as long as the primary account holder makes the payment on the time, both credit scores benefit.