I remember graduating high school and a few days later my mother sitting me down to talk to me about credit. She told me that my “school report card” will now be replaced with a “credit report” and just like how my grades were reported to my report card, how I paid my creditors will be reported to my credit report.
As a high school graduation gift, my mother surprised me with a 700-credit score. She able to do this by adding me on to a few of her credit cards as an authorized user. My mother has always had good credit and therefore, she was able to add me on to a few of her credit cards as an authorized user so that I can obtain her credit history.
I was 18 years old with a 700-credit score!!!! Not many teenagers have the bagging rights to say that!
Not to mention, not only did I have a Tier 1 credit score, I had over 20 years of positive credit history reported to my credit report too!
Over the years, I began to learn about the importance of credit and how valuable it is. I wanted to give my children the same head start my mother gave me and so that is what I did for my four children.
My children are currently 12, 6, and a set of twins who are 1 yrs old and they are authorized users on two of my credit cards. This means by the time they turn 18 years old, they will have almost 20 years of positive credit history.
What are the benefits of establishing credit for your kids?
Access to credit in case of an emergency.
Adding your child as an authorized user gives them access to credit in case of an emergency.
Teach your child good credit and money habits.
Making your son or daughter an authorized user on your credit card will give them the opportunity to learn about credit without giving them full responsibility. Authorized users have access to your credit card but are not liable for any charges. This way, you can teach them the importance of maintaining good credit before they begin to obtain credit on their own.
Increases their chances of getting approved for credit.
It has become even more difficult for young adults to qualify for a credit card on their own due to Federal laws that require credit card companies to verify income before extending credit to individuals.
That can be a huge disadvantage for your child when he or she becomes of age to apply for credit on their own. You can help you child avoid this issue by adding them to one of your existing credit cards.
Builds their credit report and credit score.
Your long credit history and good paying habits will be displayed on your child’s credit report once you add them as an authorized user on your credit card. This will help them build good credit and a good credit score. In the future, your child will have established a good credit reputation in the credit word, allowing them the ability get approved without needing a co-signer and get approved for the best interest rates.
So what’s the best age to establish credit for your child?
I don’t see a problem with giving your child a jump start in the credit and finance world. Especially since most kids don’t hear anything about credit until they reach adulthood and enter college. By establishing credit for them early on you’ll have the opportunity to show them how credit and money works YOUR way!
There is no right or wrong answer when deciding on the right time to establish credit for your child. Besides, when you add you child on your credit card as an authorized user, the actual age of the credit card will add history to their credit report. For example, if you have a credit card that is 10 years old and you add your child to that credit card as an authorized user, 10 years worth of credit history will be added to your child’s credit report no matter their age.
Although I added all of my children as an authorized user fairly early in age, I still educate my two oldest children on the importance of having good credit and how to maintain it. I don’t lead them to believe that this little plastic card is magic with tons of money loaded on to it, I show them the credit card statements, the interest that’s being charged, along with when the payment is due and how to pay it.
When children see their parents pay bills and when they are being educated how to pay them it will make them more responsible and comfortable with paying bills once they become adults.
The Ground Rules for Establishing Credit for Your Kids.
It’s very important that when you make the decision to add your child on to your credit card as an authorized user with the benefit to establish credit for them, it’s important that you have and maintain good yourself.
Sustaining a good payment history and credit usage will be vital when adding your child as an authorized user to your existing credit card because that history will be reported to their credit report.
Not all credit card issuers are created equal.
Although most credit card companies will allow you to add an authorized user, not all of them will report your credit card account history on to the authorized user’s credit report. It’s important to ask the credit card company if the credit card account will be report the authorized user’s credit report before adding them, otherwise, there is no true benefit of moving forward.
Some credit card companies also have authorized user age requirements. This means, the authorized user must be of a certain age before being added to your credit card. Most of the time, that age is between 13 and 16 years old. Credit card companies like Capital One, Chase, and Bank of America do not have an age requirement therefore allowing the primary card holder to add a child as an authorized user regardless of age.
What happens if you find yourself facing financial hardship and money woes?
Life happens and often times financial hardships come along with that. If you find your finances going into a downward spiral and your credit being at risk, it is important that you remove your child from any credit cards that you have them as an authorized user on. Remember that the payment history will be reported to their credit report. Simply call your credit card company and have them removed.