Chris Peplinski

Chris Peplinski

[Editor’s Note:  This is a guest post from Chris Peplinski, who runs a Facebook page on Building Your Credit Score. We have no financial relationship.]

I’ve been teaching and writing about credit scores for many years.  Having a credit score is a constant part of our lives.  You can either shun it and never use credit or you can embrace it, know the facts that make up a credit score, and use your score to your advantage.

Young adults usually begin their lives with poor credit scores, either by making mistakes or not having any credit.  This makes it very difficult to begin to build their credit scores.  So what can young adults do to ensure a better chance of having a good credit score early in life?  Put your children on your credit card accounts!

How It Works

This strategy to start your children’s credit score at a young age is extremely beneficial.  They will be able to apply for credit cards, loans, and mortgages without a co-signer.  They will also be able to secure the best rates for car insurance, have success renting their first apartment, and if a job needs a good credit history, they will have it.

“Put my child on my credit card account?  That’s nuts!”  I’ve heard this many times, but as long as you are diligent with not letting your child use the card and you keep your accounts in good standing, your child will reap the benefits when they graduate high school.

So what do you do?  Call your credit card companies and tell them you would like to add your child to your account as an authorized user. They will ask for your child’s name, date of birth, and social security number.  Then instantly, they will be added to your accounts.  You may request a card with their name or none at all.  As soon as your first statement after the child is added to the account is reported to the credit bureaus, your child will have a credit file and get a score.  The younger you start this process, the higher their score can become with age.  [It is possible for a child to have a credit history older than they are if you put a teenager onto a card you’ve had for a couple of decades.-ed]

Consider Freezing The Child’s Credit

Once a credit report has been made with the three credit bureaus, (Experian, Equifax, and TransUnion) the best line of defense to assure your children will NEVER have to deal with identity theft or fraud while growing up is to put a credit freeze on all three of their credit files.  This only costs $9-$30 in total, depending on what state you live in.

This whole process is quick and easy.  Then, as long as you make all your payments on time and keep your balances as close to zero as you can, your children may graduate with a credit score of 800 or better!

Reasons Not To Add A Child To Your Account

Insuring-Income-250x250-bannerNow there are some reasons NOT to do this credit score building action for your little one.  If you don’t have any credit cards, or only use a debit card, this will not work for you.  Debit cards are linked to your bank account and are not reported to the credit bureaus.

Another reason you wouldn’t want to add your child is if you carry large balances on your credit cards.  If you do, it will keep your child’s credit score low and not help out in the long run.  The amounts owed on your credit cards make up 30% of your credit score.

Finally, if you have missed payments in the past or are the type of person who knows they may miss payments in the future, don’t add your child to your accounts [and cut up your credit cards, close your accounts, and start using the envelope system for your budgeting.- ed]  Payment history makes up 35% of your credit score and your child’s newly formed credit score can be destroyed, taking years to recover.

This strategy to start your children’s credit score at a young age is extremely beneficial.  They will be able to apply for credit cards, loans, and mortgages without a co-signer.  They will also be able to secure the best rates for car insurance, have success renting their first apartment, and if a job needs a good credit history, they will have it.

Good luck setting your children up to thrive with their credit scores and all the perks that come with it.  This is just another step in a list of many to steer your children toward future success!

What do you think?  Have you tried to this trick to build an instantaneous credit history and get a credit score for your child?  Did you tell them you had added them to your account(s)?  Comment below!