How to build your kid's credit before they turn 18

Children and credit scores probably seem like two things that don’t mix. Why would a child need a credit score, after all? Won’t having credit just get them into trouble with debt sooner?

As someone who used to be afraid of credit and debt, I can understand hesitation. However, after working as an NFCC-certified credit counselor and spending over a decade teaching people about credit scores, I now see things from a different point of view.

When it comes to finances and credit, studies show that giving children an early start can create a more stable future for them. So, here’s what you need to know about building your child’s credit early.

It may sound counterintuitive, but a child can indeed have a credit score. Just like with adults, if a child’s name is on a debt-related account, they can also have credit reports and scores in their name.

So, how does a child’s name end up on a debt account? There are a few ways this can happen:

Shared accounts: You add your child’s name to your credit card account to help them build credit or to give them access to your credit line.
Mistaken identity: Your child has a similar name to someone else (usually a family member), and that person’s information was mistakenly used to create a credit report for your child.
Identity theft: Your child is a victim of child identity theft, a crime that involves using a child’s information to commit fraud or apply for credit cards or benefits.

In my experience, most parents don’t think about their children’s credit scores until it’s time for the child’s first loan or apartment. But if you wait until you reach that point, your child’s credit probably won’t be good enough to qualify. To avoid situations like these, parents can take the following steps while their children are young.

Do you have good credit? If so, the best way to help your child build up their credit scores is to add them to one or more of your credit cards as an authorized user.

When you do this, the details of the credit card account will show up on your child’s credit reports and will be used to calculate their scores. For example, if you’ve had the credit card open for 10 years, your child’s credit reports will show that they have a 10-year credit history.

To do this the right way, make sure you choose the account wisely, since your negative history with a card can impact your child. The best credit card to add your child to as an authorized user should check all of the following boxes:

You haven’t missed a payment for two years or more. The longer it’s been since a missed payment, the better.
Your balance on the credit card is low compared to the limit. The lower the better.
You’ve had the card open for a long time.

For an added benefit, try reducing your credit utilization ratio before adding your child as an authorized user. You can do this by paying down the card’s balance or by logging into your account and requesting a credit limit increase.

Check for credit reports and dispute errors/fraud

Don’t wait until something goes wrong to find out if your child has problems with their credit. Instead, check to see if they have credit reports in their name and find out if there’s any fraudulent information on the reports.

For children over 13, you or your child can pull all three of their credit reports by submitting online requests to each of the credit bureaus. If your child is under 13, the Children’s Online Privacy Protection Act restricts you from making a request online, but you can mail a request to each of the credit bureaus:

Equifax Information Services LLC

P.O. Box 740241.

Atlanta, GA 30374-0241

Experian

PO Box 9554

Allen, TX 75013

TransUnion Consumer Solutions

P.O. Box 2000

Chester, PA 19016-2000

If you find a fraudulent account on your child’s credit reports, you’ll need to contact the creditor’s fraud department to report the issue and close the account. Then, contact each credit bureau to have the information removed.

Read more: How to dispute errors on your credit reports

When you place a credit freeze on your child’s credit reports, you make it harder for fraudsters to open accounts in the child’s name. For children under 16, you can do this for them by visiting the following sites:

The goal of helping your child build good credit scores is to give them financial advantages when they reach adulthood. But without some education, your child could end up using their good credit to get into trouble with loans and credit cards.

So, instead of just helping your child build up their credit scores, start talking to them about how credit works. Depending on their age and maturity level, this could include any of the following:

Role-play making purchases with fake credit cards and paying the cards off. Explain that they’ll owe more money if they make late payments.
Let your child play the role of the creditor and ask how they would decide if you qualify for a loan.
Visit AnnualCreditReport.com together to pull your credit reports and read through the details together.
Use debt payoff calculators to show your child how long it will take to pay off high-interest debt.
Allow them to use one of your credit cards for a small purchase each month and have them pay you back by a set monthly date.

Make sure you don’t underestimate what your child is capable of learning. According to Champlain College Center for Financial Literacy, children can start learning financial basics in elementary school, or as soon as they learn how to count or perform basic math.