Money Talk: Should you Build Your Child's Credit Score? - Living on Fifty (2024)

FAQs

Should I build my child's credit? ›

Building credit for your child will put them on the path to a better financial future. Add your child to one or more of your existing credit cards or, if they are of age, consider jointly opening or co-signing a loan or credit card with them.

For another, kids don't actually inherit your credit score, based on your presumably long credit history. They only get the benefit of that one account. It will take them about six months to start compiling a credit score of their own. Most important, kids don't need your help to get credit.

Adding a child as an authorized user can build their credit

Note: Some banks, like Chase and Citi, don't ask for an authorized user's Social Security number. However, credit bureaus can still match up the user's date of birth and address with a credit file.

Giving your child his or her own credit card allows spending independence. Instead of asking you for money every time they want to spend money, they can use the credit card to make the purchase. The obvious disadvantage here is that you lose some control of their spending, too. Encourage conversations about money.

And a good place to start is by opening a credit card at 18, so you can start building credit at an early age and developing good money habits. Below, we review why it's important to get a credit card at 18 and what you can do to protect your credit score as a new cardholder.

They may think it's okay to use their child's identity temporarily. But if you don't pay it back, you will damage your child's credit score and set them up for financial hardship when they reach adulthood. The law remains the same, regardless of the circ*mstances.

Because people under age 18 can't open their own credit cards, you can't technically open a whole new credit card in your child's name — but you can still add them to yours. Adding someone to your account turns them into an authorized user, which gives them many of the same perks you have as the primary cardholder.

When your teens are ready to buy a car or rent an apartment, good credit unlocks better interest rates, lower monthly payments, and more opportunities. With Greenlight's family credit card, teens start building credit before they turn 18.

If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.

Does living with parents affect credit score? ›

Can the people I live with affect my credit score? Not unless you're 'financially associated'. This means you've applied for joint credit together, such as a bank account or mortgage. If you do have joint finances with someone, they'll be recorded on your credit report as your 'financial associate'.

Most debt isn't inherited by someone else — instead, it passes to the estate. During probate, the executor of the estate typically pays off debts using the estate's assets first, and then they distribute leftover funds according to the deceased's will.

American Express, for example, requires children to be 13 years old before you can add them as authorized users to your credit card. Other card issuers, like Capital One, leave the age of authorized users up to the primary cardholder's discretion.

Parents or guardians can take out a student loan for their child, which can be beneficial for several reasons. One key advantage is that you may qualify for a substantially larger loan amount than your child could on their own.

Credit bureaus do not combine credit scores. The only way your parent's bad credit habit can affect you is only if you have a joint account with them which is unpaid or you guaranteed a loan which has become delinquency.

How much is the tax credit per child? The maximum tax credit per child is $2,000 for tax year 2023. The maximum credit is set to increase with inflation in 2024 and 2025.