How to Build Credit for Those Under 18
As the parent of a minor, there are a few things to know about establishing your child's credit history. Legally, a child cannot apply for credit without a co-signer. For this reason, a minor has to use alternative measures to build a credit score. Doing this at an early age is good--by the time most high-schoolers are graduating and just entering the credit arena, your child can already have a high credit score. His job is to then use his established credit responsibly to maintain the high score.
Other People Are Reading
Instructions
-
Authorized User
-
1
Seek out someone who has really great credit if you do not. According to Bad Credit Advisor.com, a 700 and above credit score is excellent; 680 to 699 is very good, 620 to 679 is decent, and below 620 is considered bad credit. The person should be known for paying bills on time. It may be easier if the person is a family member. If no family members are available, choose a close, trustworthy friend.
-
2
Ask the individual to place your child on one or more of his credit card accounts as an "authorized user," known as "piggybacking." Explain that you do not want your child on the account as a "joint user." A joint user is as responsible as the cardholder for paying the credit card bill; however, as an authorized user, your child is not responsible. Advise the individual that your minor does not need access to the card information or the credit card and will not make purchases. The child's name just needs to be listed on the account. If the child makes any charges, he must pay the cardholder on time. Verify that the cardholder is paying the bills on time--if not, remove your child's name, as being listed on a late payer's account will damage the child's credit rather than build it.
-
-
3
Obtain your child's credit report after she has been an authorized user for several months, allowing time for the payments to appear on her credit file. Retrieve her credit report annually, via the "Free Annual Credit Report" website. Monitor the report to ensure that her score is being built up and not being brought down.
Secured Credit Card, Student/Store Credit Card, or Debit Card
-
4
Help your child to apply for a secured credit card in his name. His credit limit is determined by the security deposit--if the amount is $500, his credit limit is $500. The goal is to keep the balance low and pay bills on time. This information is entered on his credit report. Verify that the payments will be reported to the three major credit reporting bureaus.
-
5
Obtain a student or store credit card for your minor if she can pay a small monthly bill. Legally, an adult co-signor on the application is required. The co-signor can be anyone 18 or older and does not have to be a parent or guardian. By co-signing the unsecured credit application, you become responsible for paying the bill if your child is unable to; therefore, if you get an unsecured credit card for your child, be sure to discuss responsible card use.
-
6
Find a bank that provides youth accounts with a debit card. You can deposit a sum of money into the account, and the minor can only use the debit card if money is available. This gives your child the opportunity to learn how to manage his money, with your guidance.
-
1
References
- Photo Credit credit card image by jimcox40 from Fotolia.com
