Building credit takes time. Many young people graduate from high school or college without any credit history whatsoever. Even if they have acquired some student loan debt, they won’t have begun making payments and won’t have started building their own personal credit.
You must be 18 to apply for a credit card. Even then, you must have proof of your own income. Lenders want to know that you can make the minimum payments.
As a parent, you have another option to help your little one get a head start on that credit score. Make them an authorized user on your personal credit card.
We know what you’re thinking. Why would I put my child on my credit card? But this doesn't require you actually giving them the card. You can give them as little access to the card as you like.
So, as long as you pay your monthly payments and don’t run up a large balance, your responsible behavior will help your child starting building credit.
But, perhaps it’s not a bad idea to consider giving a young adult access to a credit card. First and foremost, how responsible is your child? If they can be trusted not to abuse the card, it’s a good idea to have one in case of emergencies.
You can also use a credit card to start building good credit habits early. Make it known that this card can only be used for gas. Give them an allotted amount per week. Make sure they return with all the receipts for any purchases they make. At the end of the month, have them sit down with you and show them how making a payment works. It’s important to stress that carrying a balance will cost extra money in interest. Paying off your balance every month is the responsible way to make use of a credit card.
As an added bonus, the authorized user’s activity will be helping the primary user gain rewards points when they swipe the card.
Not all credit card companies will report an authorized user to the credit bureaus. Check with the company first before applying.
Consider adding your child as an authorized user on a credit card. It’s difficult to build credit, and it takes time. You will give them a leg up when applying for loans later in life.
Equal Housing Opportunity Lender