Parents Can Help Kids Build Credit By Adding Them as Authorized Users
Parents who want to help their kids start building a good credit score and credit history can take a simple step: adding their child as an authorized user to their credit card account. The goal is to have the child build credit from a young age by piggybacking off their parent’s good credit.
According to Ted Rossman, a senior industry analyst at CreditCards.com, this strategy is best for kids in their later teenage years, around 16 years old, or in their early 20s. It’s a “stepping stone” to building credit and can help kids learn healthy credit card management skills early on.
Allowing kids to use a credit card and teaching them how to pay off debt responsibly can also help them learn valuable skills. However, parents should only try this strategy if they have good credit themselves.
As long as the primary account holder pays their bill on time and doesn’t carry a heavy balance, their child will benefit from their positive credit history and credit score. It’s essential to have an end date in mind, such as one to three years, depending on the circumstances.
One important consideration is that this is not a joint account, and the primary account holder is responsible for all the authorized user’s transactions. This means setting spending limits and setting clear rules and boundaries as to how the card can be used. Parents can also choose not to give the card to their kids, and the credit benefits will still translate whether or not they use the card.
In conclusion, adding a child as an authorized user to a credit card account can be a simple way for parents to help their kids build credit and establish healthy credit habits early on.