by Christy Bieber | Updated July 21, 2021 - First published on Oct. 21, 2020
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Putting your kids on your credit cards can make a lot of sense.
My son turned one last month. For his birthday, I gave him a credit card with $85,000 in available credit. Since he's not quite old enough to hit the mall and stock up on toys or slap the card down on the counter at Build-a-Bear, it may not seem at first glance like he'd need quite so much credit.
He has access to it because I made him an authorized user on my primary credit card. And I did that for an important reason: Because he's an authorized user, the card's history shows up on his credit report.
By the time he's 18 years old and ready to apply for a credit card, car loan, or other loans of his own, he'll have a very long credit history and should be well on his way to earning a great credit score.
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For many young people, building credit is difficult. Lenders don't want to approve younger borrowers who don't have a track record of responsible repayment. Unfortunately, this creates a difficult catch-22: It's hard to build credit unless you can get credit.
My son won't have this issue. Because I added him as an authorized user to my credit card, I've taken an important step to make sure he won't ever have a hard time getting approved for credit when he needs it.
See, when you add someone as an authorized user, the entire history of the credit card shows up on their credit history as if it were their own card.
Some of the most important factors in determining your credit score include your credit utilization ratio (the amount of credit you've used relative to the amount available), the age of your account history, and your positive payment history. My son will now have a very old credit card on his record, and one that has a flawless payment history and a lot of available credit (mainly because I obsessively request credit line increases whenever they become available).
This isn't a difficult technique for parents to implement. In fact, many credit cards allow you to add children as soon as they are born. Others let you add them once they reach a certain age, such as 13 or 15. And your child doesn't have to undergo a credit check or formally apply to become an authorized user -- adding my son was as easy as clicking a few buttons online and providing his Social Security number.
Of course, you'll want to make sure to pay the card on time. It also helps to add your child to a card that's been open awhile and doesn't have a high credit card balance. Taking these steps will ensure your child gets the most benefit out of this technique.
Because my son is an authorized user, he has the right to use my card, but not the responsibility of making payments (that lies with me). Since he's one, he's not even aware that he has a card in his name yet. When he gets older and shows he can be responsible with money, I may give him the card to use for small purchases -- but your kids don't have to physically have a card or use it to get the benefit of it showing up on their credit report. Of course, as a bonus, if I let him charge on my credit card in the future, I'll earn rewards for his spending.
Regardless of whether he helps me rack up credit card rewards points, though, I'll have the benefit of knowing I took a really simple step that can make a real difference in his credit score. If you want to set your own child up for an easier time borrowing in the future, consider adding your child to your card today.
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