It’s possible for your children to have an excellent credit score without them charging one single cent.
Adding your child as an “authorized user” to your credit card is a gift that keeps on giving.
According to Sean McQuay’s article, “How to Give Your Child Excellent Credit,” you can add a child of ANY age as authorized users of your credit card.
Now before you give your 13-year old your card to let him spend thousands of dollars on Itunes, let’s set the ground rules.
This makes sense only if YOU have excellent credit.
You don’t have to give your child the actual card. The credit bureaus don’t know the difference. Shred it, hide it; it is up to you. Your children do not have to make any purchases for them to get the benefits of your sterling credit record.
If you let your children have access to the card, it is your responsibility to teach them how to use it. If not, this whole experiment will end in the destruction of both credit scores.
With student debt currently over $1 trillion, education about the use and misuse of credit is desperately needed.
Amazingly, many high school and college students have no clue what a credit score is.
According to McQuay, this can be an eye-opening experience:
“The first time I found out my credit score was when I applied for an apartment and they requested my credit information,” Megan told me. “I remember sitting at the desk in my dorm room, and once I found out, I immediately called my mom and then I ran around and told all of my roommates. Sadly they didn’t share the excitement since they had no idea what a credit score was.”
It has been found that despite the best efforts of financial literacy programs, the biggest influence in the way kids end up handling their money are the actions of their parents.
Having an “authorized user” on your card can be a win-win situation for both parent and child.
First, it forces parents to control their impulses and use debt responsibly.
Unlike many other new year’s resolutions, this one has a good chance of making it.
Most parents will do anything for their children. Having a good credit score so your children can piggy back on your responsible behavior provides excellent motivation for following through with a disciplined program regarding spending limits.
Think of your kids applying for a job, mortgage, or an apartment and being turned down because of your credit score. This can easily be transformed into a happy ending with better spending choices.
Some credit scoring companies are not happy with this loophole. Things could change in the future.
For now, parents can get their kids a good credit score even if they shred their child’s card when it arrives.
This is a deal too good to turn down.