Money Talk: Should you Build Your Child's Credit Score? - Living on Fifty (2024)

FAQs

Should I build my child's credit? ›

Building credit for your child will put them on the path to a better financial future. Add your child to one or more of your existing credit cards or, if they are of age, consider jointly opening or co-signing a loan or credit card with them.

For another, kids don't actually inherit your credit score, based on your presumably long credit history. They only get the benefit of that one account. It will take them about six months to start compiling a credit score of their own. Most important, kids don't need your help to get credit.

Adding a child to your credit card as an authorized user can help them establish a credit history. Your credit history can boost theirs, and improve their odds of getting approved for credit later. Any charges they make are your responsibility; be sure to set clear guidelines and know the risks.

And a good place to start is by opening a credit card at 18, so you can start building credit at an early age and developing good money habits. Below, we review why it's important to get a credit card at 18 and what you can do to protect your credit score as a new cardholder.

According to the Federal Trade Commission, information like a child's Social Security number, birth date or other personal identifying information can be used to open bank and utility accounts as well as apply for credit cards, loans and government benefits.

Because people under age 18 can't open their own credit cards, you can't technically open a whole new credit card 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.

As a legal guardian, you can request a free copy of your child's credit report by completing the request form on annualcreditreport.com . This will help you access one free credit report per year from each of the three credit reporting agencies: Equifax, Experian, and TransUnion.

You can add a child under the age of 18 to a credit card as an authorized user as long as the child meets any age restrictions set by the issuer.

Can my parents add me to their credit card to build credit? ›

Being added as an authorized user on another person's card may help you establish a credit history or build your credit. Yet cardholders and authorized users' on-time, late or missed payments will be added to both parties' credit reports, so it's important that cardholders and authorized users see eye to eye.

Primary account owners are solely responsible for making sure that credit payments are completed on time, but can set spend limits on an authorized user's card to help maintain reasonable spending. An authorized user can see their score drop if they are removed from a well-maintained credit account.

Being an authorized user will also establish a credit report for your child (though some card issuers won't report authorized-user accounts until age 18). Paying your bill on time and keeping your credit utilization ratio low can help build your child's credit.

Can the people I live with affect my credit score? Not unless you're 'financially associated'. This means you've applied for joint credit together, such as a bank account or mortgage. If you do have joint finances with someone, they'll be recorded on your credit report as your 'financial associate'.

Piggybacking credit is when someone adds you as an authorized user on their credit card to help boost your credit. This method isn't guaranteed to work, one reason being that not all credit card companies report authorized users' activity to the major consumer credit bureaus in a way that helps them build credit.

Credit bureaus do not combine credit scores. The only way your parent's bad credit habit can affect you is only if you have a joint account with them which is unpaid or you guaranteed a loan which has become delinquency.

Adding yourself as an authorized user on someone else's credit card could help to build and establish your credit. However, there are some important factors to consider since becoming an authorized user can actually hurt your credit score if you're added on an account that is not in good standing.