– This is how you build your kids’ credit score
Building a credit score for your child could be advantageous for them as they grow up early in life as credit history is a major factor for an overall credit score. It is a common misconception that children have to be age 18 to start building their credit, but it is actually possible for minors to start building up a credit score.
How To Build Credit For Your Child
How do you start building credit for your child? If you want to build credit for your child before they turn 18, then you should consider adding them as an authorized user to one or more of your credit cards. There is no legal minimum age for adding a child as an authorized user for a card, but the policies for each credit card vary. For example, Chase does not report the user credit history of minors to Credit Reporting Agencies.
Note: After the minor grows up, then they can request to be removed as an authorized user for certain cards if it is having a negative impact on their credit scores.
Taking on a small personal loan could also help a young person build their credit. But you should only do this if you are confident about paying it on time and being able to make the monthly payments. Missed or late payments could drastically lower a credit score. Also, confirm whether the lender will be reporting the loans to credit bureaus.
When Can Children Start Building Credit On Their Own?
Credit builder loans require children to have a minimum age of 18. And credit cards require children to be 21 to get a credit card themselves unless there is an adult co-signer who can provide an income.
Checking Your Child’s Credit Score
It is recommended that you check your child’s credit score before they turn 18. For example, the Federal Trade Commission (FTC) recommends that parents or guardians review a child’s credit report when they turn 16. This can be done by using AnnualCreditReport.com. Or you can order a free credit report every year from Equifax, Experian, and TransUnion.
Talk To Older Children About Credit Scores
Often times on college campuses, children are asked to sign up for credit cards in exchange for swag such as a TV shirt, gift cards, and other merchandise. Children should be aware that this could add a hard inquiry to their credit scores for two years and adds a credit card account to their credit report as well.
You should also explain to them the importance of paying bills on time and how interest works on credit cards. As a student, they might not always be able to pay the balance every month but they should never miss the minimum monthly payment. And if they are carrying a high balance on a card, then they should be encouraged to switch to a balance transfer credit card.
It’s also worth mentioning that you can sign up for Credit Karma (free credit checking service) after turning 18 or older.
