Video: 3 ways to help your kids build credit


Add a child as an authorized user, establish a checking account, and help them learn about money

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Once your child goes off to college or joins the working world, they will quickly discover how important good credit is for anything they want to do: rent an apartment, buy a car and even land a job. That’s why helping them build credit and credit knowledge before they need it can make the road to adulthood a lot smoother.

1.Add your children as authorized users on your credit card. If you have excellent credit yourself, you can consider adding your older teenage kids as authorized users on your credit cards. This will allow them to piggyback off your credit history and establish a history of their own. Beware though, since they will be inheriting your credit history, only do this if your own score is excellent and you are diligent about paying your bills on time.

Once they’re an authorized user, you’ll get a credit card with their name stamped on it. If you’re worried this will result in an unauthorized spending spree, do as Austin, Texas, mother Simran Gutierrez’s parents did: Keep it a secret until they are old enough to be responsible with their spending.

“Without us knowing they made those monthly payments on time, in full, every month,” says Gutierrez.

Building your kid’s credit early on will give them an older credit history when they’re ready to use it, upping their score and their chances to rent without a co-signer or take out a car loan with a low interest rate. Gutierrez says she is still reaping rewards from her parents’ planning. “I bought my first car and I’m paying zero percent interest.”

2. Help your children open a checking account. Another way to help your kids build a strong financial future is to open up a checking account for them as early as 13 or 14 years old, with you as a co-owner. While this won’t necessarily build their credit history, it will teach them the cardinal rule of good credit: Only spend what you can afford. Learning the habits of checking their balance regularly and recording everything they spend, even if it’s an online purchase, will make them much more aware of where money goes and how each purchase affects what they have in the bank.

3. Educate your children about credit. Finally, remember that education is key and it can start as soon as they learn the words, “I want that toy.” From budgeting classes designed specifically for young kids, to books you can read at home, to fun video games that can help make them competitive savers, there are numerous ways for every child to learn the importance of budgeting and building credit.

Gutierrez says it’s the greatest gift she received and one she’ll give back to her own child.

“For her to be able to start that process without any hiccups is something that is a no-brainer for me.”

See related: Video: 4 ways students can build credit, Teaching children about credit, debit cards

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