The best way to help build your childs credit is to show them the ropes at an early age. Whether theyre in elementary school or getting ready to leave the nest, learning these skills before adulthood can help them establish strong credit and shore up their financial future when theyre ready. There are some simple steps you can take to support them in that goal. Parents can begin building their childs credit by following these five tips.
Minor children typically dont have credit reports and credit scores. (If they do, thats a red flag for potential identity fraud.) But you dont have to wait for them to come of age to start teaching them about money. The sooner they become familiar with financial basics, the better prepared theyll be to manage their own money. Below are some jumping-off points:
You can also check with the three major credit bureaus (Experian, TransUnion and Equifax) to see if your child has a credit report. If they doâand you discover fraudulent information within itâyou have the right to dispute it and also have the right to freeze their credit to prevent further damage.
Establishing good credit is an important part of financial health. With good credit, your child will have more options for loans, credit cards, mortgages and even renting an apartment. The good news is that you can start building your child’s credit long before they turn 18 years old. This article will provide parents with tips and strategies to help their kids establish credit history and positive financial habits from a young age.
When Can You Start Building Your Child’s Credit?
The ideal age to begin developing your child’s credit is between 13 and 15 years old. Here are some key things to know about the minimum age requirements:
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Children typically don’t have a credit report until age 18 unless they are authorized users on a parent’s credit card
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Most credit bureaus let you request a manual credit report search for children under 13 This checks for any fraudulent accounts opened in the child’s name
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Children can be added as authorized users on a parent’s credit card at any age This allows them to inherit the card’s payment history,
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At 18, children can apply for student credit cards, secured cards and loans to start building independent credit history.
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The minimum age to apply for a standard credit card without proof of income is 21. With sufficient income, it may be possible for an 18-20 year old to qualify.
While credit bureaus place age limits on credit reporting, building healthy financial habits can begin in the toddler years. Teaching money management skills early will set your child up for credit success down the road.
5 Ways to Help Your Child Build Credit
Here are the top recommended strategies parents can use to help establish their child’s credit history:
1. Add your child as an authorized user on your credit card
Adding your child as an authorized user allows them to benefit from the primary cardholder’s payment history. As you make on-time payments, it helps build positive credit for any authorized users aged 18 and over.
For children under 18, you’ll want to verify that your card issuer reports authorized user activity to the credit bureaus. Capital One is one major issuer that reports for authorized users of all ages.
2. Open a joint savings or checking account
Joint bank accounts allow teenagers to practice money management in a low-risk environment. Look for student checking accounts or teen savings accounts at banks like Chase and Capital One. Managing a joint account responsibly can help demonstrate financial readiness for future credit.
3. Help them get a secured credit card at 18
Secured credit cards require a refundable deposit that serves as the credit limit. They help young adults build credit through responsible use. Look for options like the Discover it® Secured Credit Card that provides cash back rewards.
4. Add your teenager as an authorized user on a student credit card
Student credit cards offered by issuers like Discover and Capital One are designed for consumers new to credit. Adding your college-aged child as an authorized user can give an extra boost to their independent credit history.
5. Co-sign a credit card or loan at 18
If your teenager has proven responsible enough, co-signing a loan or credit card can help them establish primary account history. Just be sure you’re ready to take responsibility for repayment if needed.
Establishing Healthy Credit Habits Early On
Building credit doesn’t have to wait until your kids are teenagers or young adults. You can start instilling positive financial habits at a young age:
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Give an allowance: Let younger kids practice earning and budgeting a small amount of money each week.
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Open a savings account: Have them save toward goals like a new bicycle or video game.
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Use debit cards: Get teens a checking account and debit card to track spending.
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Explain credit vs. debit: Make sure kids know debit cards deduct real money while credit is a loan.
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Discuss credit scores: Teach older teens how scores work and how to maintain great credit.
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Review credit reports: Order reports together once they turn 18 to ensure accuracy.
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Set spending limits: Agree on appropriate limits for authorized user or joint credit accounts.
Laying this early groundwork makes your child more likely to use credit wisely down the road.
Options to Build Credit for 18-21 Year Olds
Once your child turns 18, there are more credit-building options to consider:
Student Credit Cards
Student cards tend to have lower credit requirements and smaller limits. They help young adults learn responsible credit habits. Student rewards cards like the Discover it® Student Chrome offer cash back incentives.
Secured Credit Cards
Secured cards require a refundable deposit that becomes the credit limit. They help consumers with limited credit history build a positive payment record. The Discover it® Secured Credit Card is a strong option that provides cash back rewards.
Credit-Builder Loans
These loans place the borrowed money into a savings account as collateral. By repaying the loan successfully, you can establish on-time payment history. They often have high interest rates, so compare options carefully.
Co-Signed Credit Cards
If your college-age child has proven responsible enough, co-signing a card as the primary account holder can help them build independent credit history. Educate them on consequences of missed payments.
Authorized User Accounts
Staying on a parent’s credit card as an authorized user after age 18 can provide an ongoing boost to your child’s credit, allowing them to inherit your good history.
Monitoring Your Child’s Credit Records
To protect your child against identity theft and ensure accurate credit records, it’s important to monitor their credit reports. Here’s how:
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Order free annual credit reports for children over age 13 at www.AnnualCreditReport.com.
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For children under 13, contact each credit bureau to request a manual search for any credit records.
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Starting at age 16, check your child’s credit reports regularly to watch for issues.
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Use credit monitoring services like CreditWise from Capital One to track credit information once your child turns 18.
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Act quickly to dispute any unknown or fraudulent accounts with the credit bureaus.
Monitoring credit reports allows you to watch for problems and help educate your child on how to maintain healthy credit.
Let Their Credit Journey Begin
Establishing credit doesn’t have to be intimidating. As a parent, you have many options to help your child gain positive credit history, both early and into adulthood. Maintaining open communication about financial responsibility is key.
With an authorized card, student credit account or secured card, your teenage and young adult children can start building trustworthy credit habits. By starting early and monitoring progress, you can set your kids up to establish strong credit history and financial skills they’ll use for life.
Add Your Child as an Authorized User on Your Credit Card
In most cases, you have to be 18 to open your own credit card. One workaround is to add your child as an authorized user on one of your accounts. They may need to be at least 13 years old, though some credit card issuers have no minimum age requirement. As an authorized user, theyll receive a credit card in their name thats linked to your account. This will allow them to make purchases, but they arent responsible for repayment.
Being an authorized user will also establish a credit report for your child (though some card issuers wont report authorized-user accounts until age 18). Paying your bill on time and keeping your credit utilization ratio low can help build your childs credit. You can also teach good credit habits by having them reimburse you for all their charges.
Teach Your Kids How Credit Works
The goal is for your child to understand how to manage their credit by the time theyre a young adult. In that spirit, here are some core credit lessons you can teach them at each stage of their childhood:
- Introduce basic concepts about money, such as how to identify coins.
- Explain the concept of savings by giving them a piggy bank.
- Teach the value of money by involving them in your purchases.
- Go over how a debit card works.
- Explain what debt is and how credit is different from debit.
- Play personal finance games together that reinforce different financial skills.
- Show them how a credit card works.
- Explain how to use a credit card responsibly.
- If theres a big-ticket item they want to buy, offer to loan them the moneyâand charge interest. If they dont have a way to pay you back, encourage them to get a part-time job or increase their household chores for more allowance so they can save for the purchase themselves instead of being in your debt.
Building Credit For Your Kids
FAQ
At what age can you start building your child’s credit?
Can I build my child’s credit by adding them to my credit card?
Yes, adding children as authorized users can help their credit scores. It’s up to the primary cardholder to maintain a healthy credit score so the authorized users can reap the benefits.
Can parents build their child’s credit score?
As a parent, there are lots of ways to help your child establish and build credit. Adding them as an authorized user on your credit card account could be one. And once they turn 18 or 21, they’ll typically have other options like secured credit cards and student credit cards.
Can I open a credit line for my child?
Because people under age 18 can’t open their own credit cards, you can’t technically open a new credit card account in your child’s name — but you can still add them to yours. Adding someone to your account turns them into an authorized user, which gives them many of the same perks you have as the primary cardholder.