How to help build credit for your child
As a parent you want to set up your kids for success. And when it comes to finances, there are lots of ways you can help.
One is helping your child establish credit. After all, a good credit history can come in handy for everything from getting a credit card to leasing their first apartment.
What you’ll learn:
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If you use credit responsibly, adding your child as an authorized user on your credit card account is one way to help them build credit.
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Capital One reports authorized users to the credit bureaus. But if your issuer doesn’t do that or the card isn’t used responsibly, being an authorized user won’t help your child build credit.
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Once your child turns 21 (or 18 in some cases) they may have access to secured cards and student cards.
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The Consumer Financial Protection Bureau (CFPB) suggests checking your child’s credit reports to spot errors and signs of identity theft.
1. Talk to your kids about money early
Teaching your children about money could help prepare them when it’s time to put good financial habits into action. As they get older, you can teach them more advanced concepts to help them build a credit history and an overall strong financial foundation as they enter adulthood.
Here are a few possible examples based on their age:
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Young children: You can start by teaching them how to save money and why it matters. You can also pay them a regular allowance to demonstrate how money is earned.
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Middle school-aged children: Once they’re in middle school, you can explain the basics of credit and why having good credit scores matters. You can also review the importance of budgeting for both essential and fun expenditures.
- High school-aged children: If you have a high schooler, you can help them understand how a credit card works and how to use it responsibly. They might also be looking into bigger-ticket items that require a loan. You can use this opportunity to teach them how interest rates work and the importance of savings.
2. Lead by example
Demonstrating to your children how you manage your money can make financial lessons relatable and relevant to their everyday lives. Showing your children how you budget and track your spending could be helpful. You could also describe the steps you’re taking to accomplish a financial goal.
3. Add your child as an authorized user
It’s possible for your child to start building credit if they become an authorized user on your credit card account. Some issuers have a minimum age requirement for authorized users. And not every issuer reports the account activity of authorized users to credit bureaus like Capital One does.
As an authorized user, they could have their own card and can learn about the responsible use of credit. And when they’re ready to apply for a card of their own, being an authorized user could put them in a position to have more options. Keep in mind that authorized users can typically make purchases using the account, but the primary account holder is responsible for making the payments.
4. Check their credit reports
Credit bureaus typically don’t generate credit reports for minors, but your child could have a credit profile if:
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They’re an authorized user
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They’ve been a victim of identity theft
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A credit bureau confused them with someone who has a similar name
Even if you’re pretty sure your child has no credit history, the CFPB suggests you check. That way, you can be more confident about your child starting out with clean credit reports. You can get free copies of your child’s credit reports from each of the three major credit bureaus at AnnualCreditReport.com.
Once your child is 18 and has established credit, they can use CreditWise from Capital One. CreditWise is free and lets them monitor their credit report without hurting their credit scores.
6. Consider opening a bank account for your child
Opening an account like a Capital One Kids Savings Account could help them set savings goals and learn to make deposits. Young adults might benefit from the extra independence and experience offered by a teen checking account from Capital One.
7. Research options available once your child turns 18
Once your child turns 18, they’re not a minor anymore. But there are still laws about issuing them credit cards. “In most cases, you’re required to be at least 21 to get a credit card,” the CFPB says. That’s unless the applicant can prove they have sufficient income to make monthly payments or have a co-signer who’s 21 or older.
Many major credit card issuers don’t allow co-signers. But your child’s 18th birthday might offer an opportunity to talk seriously about what it means to have their own card in the future. That might include cards for people establishing or building credit, such as a secured card or a student card.
Key takeaways: How to build credit for your child
As a parent, you can help your child establish and build credit in lots of ways. 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 a secured credit card or a student credit card.
