Having good credit is important for adults since your credit can be used as a way of determining whether you’re qualified for a job, an apartment, or the best rates on a loan or credit card. As a parent, you teach your children many different things, including how to save and budget their money. So, how do you help establish good credit for your children?
When Should Children or Teens Start Building Credit?
Your child probably won’t be able to get a loan or credit card in just their name until they’re at least 18. For many young people, a student loan is the first form of credit they have. When they’re at least 18, you may want to consider co-signing for a car loan or a credit card to help them establish credit.
You can help your child start to build credit even earlier by allowing them to be an authorized user on your credit card while they’re a teenager. Different credit card issuers have different rules regarding the minimum age an authorized user can be. Some have a minimum age of 13 or older while others don’t have a minimum age requirement.
Becoming an Authorized User
If you decide to allow your child to be an authorized user, they’ll be able to make purchases but won’t be responsible for paying them back. This allows a positive payment history to begin to show on their credit reports. Make sure your child understands that every purchase on credit is something that has to be paid back, either in full as soon as possible or by making payments over time.
Secured Credit Cards
If you’re not comfortable with allowing your children to become additional cardmembers, when they’re 18 they can begin to build their own credit. One way they can get started building credit is with a secured credit card. They’ll deposit funds into the bank which will be held as security. The bank will establish a credit line, which is usually equal to the funds on deposit. As they begin to establish a history of making payments on time, the bank may eventually convert the account to an unsecured card.
Protecting Your Child’s Credit
Identity theft can happen to anyone, even children under 18. To help reduce the risk of your child’s identity being stolen, keep their social security number safe by being careful to protect documents that have personal identifying information. Teach your child to limit the amount of personal information they share online. If you start noticing credit card offers or bills being mailed to your child while they’re a minor, it may be a sign that their identity has been stolen.
If you’re afraid your child’s identity may have been stolen, contact the credit bureaus to see if there’s a credit report in their name. If there is, you can dispute information that’s being reported with the credit bureaus. Contact Dovly, an AI credit engine for help with this process. We can help you resolve credit reporting errors for you or your children. Try it risk-free with our free membership tier.
