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Helping Your Child Build Credit

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Teenage girl holding a credit card sitting in front of her laptop

Were you like me? Did you turn 18 and go to buy your first car but were denied and told you needed a cosigner because you had no credit history?

Now that my children are getting older and will be venturing out on their own in a few years, I have been thinking about ways I can help them now to start building a positive credit history. Here are some tips to help your children build their credit history now.

Assuming you have good credit card habits, you can add your child as an authorized user to one of your credit cards. This is a good way to help your children establish their own credit record if you think they are mature enough to handle a credit card.

As an authorized user, your children will get a card in their name that is tied to your account. While authorized users can make purchases, only the primary cardholder is responsible for making payments.

Before adding your children to your card, call your credit card company to confirm that the children’s activity will be reported to the credit bureaus. Otherwise, this is not helping your children build their credit history. Also make sure to use only a small portion of the credit line and pay the bill in full each month.

Check with your financial institution because some offer student credit cards, even to those under the age of 18. This is a credit card in which a parent or guardian is a joint owner or cosigner of the account.

If you choose either of these options, set some ground rules regarding your children’s use of the credit card.

  • Will you set a maximum monthly amount your children can charge?
  • Will you make them pay for their transactions?
  • Is the credit card for emergency purchases only?
  • Who is responsible for making the monthly payment?

Not only is helping your children build a good credit history important, but you must educate them about the pros and cons of using credit. Make sure they know that when they use their credit card, they are borrowing money from someone that must be paid back.

Talk about interest and why paying off the balance in full each month is important to avoid paying any interest and that it will impact their credit score. Sit down with them and go over credit card transactions every month and teach them how to make a payment.

Carrie Johnson, Ph.D., AFC®
NDSU Extension Specialist and Associate Professor  /  Human Development and Family Science