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5 Ways to Help Your Kids Establish Good Credit


Have you struggled to manage your credit in the past? If you have, it's likely that you would want to help your child avoid the same fate. Negotiating young adulthood is never easy especially for young people who are ready to flee the nest. Having good credit could make their experience much easier because they will have less issues getting a car loan and they likely will not have to pay higher interest rates for the loans they get. As a parent, one of the best things you can do for your child to make their life easier is by educating them about credit from an early age.

Below are a few pointers on how you can put your child on a path to good credit.

1. Open Savings and Checking Accounts 

A savings account is an easy way to introduce your child to financial responsibility with little risk involved. However, just having a checking account and a debit card does not improve your child’s credit score. The secret to good credit rating is having solid money management skills from a young age. Do not just open the savings account and leave it at that, help them regularly deposit the money they earn. Teach them to pay for purchases using their debit card. By doing this, you will be teaching the child how to spend wisely and avoid declined debit card penalties.

2. Encourage Your Teen to Get a Job

For your child to be a responsible adult, they need a solid work ethic. If they are in high school they can get a part-time job, which will help them better learn the value of money, enjoy the thrill of having their savings grow and feel the disappointment of blowing all their savings because of a wrong decision they made. Other than that, having a steady income can come in handy when they are ready to apply for their credit cards. Credit card issuers have to verify applicant's source of income before issuing a credit card.

3. Add Your Child as an Authorized User on Your Credit Card

If you think your teen is not ready for a credit card, you can add them as an authorized user on your credit card. The issuer will allow it as long as your credit habits are sound. Making them an authorized user is a great way to help your child establish their credit record. Even though you are the one liable to pay back the borrowed money, it helps if your child pays off their portion. By doing this, you are not only teaching them to be responsible but also growing their credit as you use and pay off the card each month.

4. Put One Utility Bill in Their Name

If your teen still stays at home, it would be a good idea to let them pay at least one utility bill around the house. While paying bills on time are not reported to credit bureaus failing to pay is reported. Therefore, paying bills on time does not build credit, but it is an opportunity for them to learn how to budget and pay for their bills when they do not have much at stake.

5. Have Your Child List Your Home Address as Their Main Residence

This applies to children who have already gone off to college. Lenders want to see stability when it comes to an individual’s living arrangement, but college students change their address at least once a year. Having your son or daughter list your home as their residence will make them more favorable when applying for a credit card than having to list four different addresses within four years.

Helping your child build credit is a noble goal, and there are many ways to achieve it. The above are just a few tips to help you on your journey. The idea is to start early and go slow.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.