Too young for credit: Don't add an infant to credit card account
Adding a child as an authorized user too early is risky
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Dear Opening Credits,
My wife and I recently had our first child. In today's world, your credit score plays a large impact in insurance rates, borrowing ability, etc. Because of this I would like to start establishing credit history for our child. If I add my child as an authorized user to our credit card accounts, will this begin a credit history for him to where he will start out at a higher level and be able to take advantage of better opportunities? Or will this do absolutely nothing for him? -- M.W.
Please tell me you're joking. You don't really want your infant to be an authorized user on your credit card account, right? Where, pray tell, would he even keep the card -- tucked into his diapers? Perhaps use it as a teething instrument? I'm guessing you won't actually give the kid the card, but I think you may be jumping the gun a bit here.
So, assuming your questions are genuine, here are your answers.
Yes, a good credit report that translates into a high credit score is important for most adults living in this country. It serves a specific purpose. Many businesses rely on the information contained in the reports and the scores that are generated from them to make the most accurate and objective lending decisions possible.
Among those pulling the reports and scores are insurance companies, lenders, some employers and landlords. In general, what these businesses are looking for is what kind of borrower you have been in the past. With that information, they can predict what kind of risk you might be in the future. If your reports show a long pattern of excellent credit management, your credit rating will be high. This can give you an edge on jobs and rentals, and preferable terms on credit, mortgage and insurance products.
So given the advantages of having an established credit history, I can see why you'd want your children to jump into the pool early. While other young adults are dog-paddling, your offspring will be Olympic-level backstrokers, right?
Hold off. Even though some credit issuers do not have a minimum age requirement for authorized users, I would recommend letting another person share your account only when they are old enough -- chronologically, emotionally and intellectually -- to handle the responsibilities that come with plastic.Plus, if for some reason you and or your wife's credit heads south, your bad behavior will cause the authorized user's score to fall, bringing down baby's credit with yours.
Once your children grow into teenagers, however, I think it would be fine for you add them to your account as authorized users under certain conditions:
1. You've explained precisely how credit works. Cover interest rates, why keeping debt down is important, credit security and the role of credit reports and scores.
2. You give them spending guidelines. Explain what they can use the card for and the amount they can charge.
3. You keep close tabs on their charging activity. Read over card statements and credit reports with your kids. So you're always aware of the balance, make it a rule for them to contact you before and after charging, and set up text alerts -- if available from your card issuer -- to get up-to-date charging activity sent to your cellphones.
4. They understand and accept what will happen if they abuse their privileges. What are the consequences of not following your rules? Make them clear and put them in writing. For example, if you expect them to reimburse you for charges within 30 days and they don't, you will remove them from the account immediately.
As for you, know that what they do with the cards could affect your credit history as well as theirs. Authorized users enjoy charging privileges, but the card issuer can't turn to them for payment. For these reasons, adding anyone to your account is not child's play.
One other option: You can add your teenager as an authorized user to your card account and never give him the card to use. That way you don't have to worry about your child succumbing to temptation and pulling out the card to buy the latest video game or Xbox.
Another thought about adding an infant as an authorized user on a parent's card account -- you might be opening the door for your child to become a victim of identity theft. The sooner you create a credit file on someone, the more opportunities there are for a family member or complete stranger to hijack that person's credit identity.
So while your concerns are somewhat valid, I say hold off another 15 years before adding your child to any of your credit accounts.
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