Many years later, when my husband and I were going through the mortgage approval process together, we took a close look at our credit scores. We both had good credit, but my FICO scores were still a great deal higher than my husband’s scores, largely because of the length of my credit history.
My husband is not originally from the U.S. and had only had credit history for as long as he had been in the states. Because my credit history technically started when I was 16, I had an almost ten-year advantage over him. It clearly made a big difference in our credit scores, so thanks Mom!
If you want to help your teenager get an early start building good credit too, here are a few things you can try:
1. Add them as an authorized user to one of your credit cards.
Many major credit card issuers will report authorized users to the credit bureaus, but not all of them do. If you’re trying to help your teen build good credit, first check with your credit card company to see if they report authorized user accounts to the credit bureaus. It’s also a good idea to add your child to a card that has a low credit utilization ratio and a long history of timely payments, since authorized users will more or less inherit the primary cardholder’s history for that card.
Adding your child as an authorized user on one of your credit cards isn’t just about building credit—it’s also a way to help them learn responsible credit habits before they leave home. If you do add your teenager as an authorized user, you may want to sign into your account regularly and review monthly statements with them as needed. When I was added to my mom’s account, she kept close tabs on what I was spending and I paid the balance monthly.
2. Open a secured credit card for your teen.
As an alternative to adding your child as an authorized user on your own card, you could have them open a secured credit card in their own name once they turn 18. A secured credit card allows someone with no credit to get a credit card, but there’s a catch—to open the card, you must make a cash deposit that serves as collateral.
The amount of the cash deposit required for collateral depends on the issuer and has an impact on the credit limit for the card, but a secured credit card could be a better option than adding your teen as an authorized user if you don’t have good credit or if you want your teen to feel more responsible for their own credit card.
3. Request and review your child’s credit report.
You can have your teen request their credit report (or you can do it for them) so you can walk through the report with him or her. Discussing the report can help your child get an early start on their personal finance education, and it also gives you an opportunity to verify that the information is correct and there are no signs of identity theft.
As you talk through the credit report together, take the opportunity to teach your teen the kinds of behaviors that will increase their credit score over time, such as making payments on time and keeping credit utilization low. If you currently have or have had credit problems in the past, those are also worth discussing with your teen so they can understand the pros and cons of credit and hopefully get an early start on their path to financial independence and security.
The experience that comes from helping your teenager learn responsible credit management has no substitute—and if you help guide them through some of the pitfalls while they are still young, you can hopefully help them avoid some of the most basic credit mishaps in the future. Trust me, they will thank you for it!
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