Consumer Comeback Blog

Helping Your Kids Build Good Credit Scores

One of the things that parents try to do, as their children grow up and get ready to go out and start families of their own is to instill a good sense of financial responsibility. You want your kids to get good jobs, not have too much debt, have a decent credit score, own their own home and maybe even have a few bucks left at the end of the month in order to help pay for the luxury nursing home you hope to wind up in.

Part of that process is helping your kids to build a good credit report and score. Why is that so important? Well, while this is changing by law in some states, employers will often take a look at a prospective employee’s credit score to try to determine whether the person would make a good employee. Your child’s car insurance rates are going to be impacted, in many states, by her credit score, as well.

There are actually things you can do to help your kids build a good credit history, beyond just teaching them about money, credit and good fiscal habits. You can, for example, take a credit card account out with your child as an authorized user.

When you have a credit card with an authorized user, all of the activity on the card will be shown on both credit reports. That will, of course, impact both of their credit scores.

This kind of situation is good for when you have a son or daughter that’s in college, for example. You can give your child some added flexibility and security by making them an authorized user on one of your credit cards.

The trick here is to keep a close eye on your child’s credit card activity, especially if they’re responsible for making the payments. If you’re a cosigner on your child’s credit card and he doesn’t make the payment, it’s going to bring down your own credit score. The same is true if your child keeps the credit card maxed out, as the ratio of debt to available credit is an important factor in your credit score.