Can Making My Child an Authorized User Help Their Credit?

Many individuals seek ways to help their children establish a solid financial footing. Adding a child as an authorized user on an existing credit card account allows them to benefit from the primary cardholder’s positive credit history, helping build their own credit profile. While not a standalone solution, it can serve as a valuable starting point for financial responsibility.

Understanding Authorized User Status

Being an authorized user means an individual can make purchases using the account and typically receives a card with their name on it. The authorized user does not hold legal responsibility for the debt; the primary cardholder remains solely liable for all charges and timely payments.

Many credit card issuers report account activity to major credit bureaus (Experian, Equifax, TransUnion). Information reported includes the credit limit, credit utilization, and payment history, which reflects the primary account’s characteristics on the authorized user’s credit file.

While most major issuers report authorized user activity, not all do, and policies vary for minors. Some issuers may not report account activity for authorized users until age 18. Confirming the issuer’s reporting policy before adding an authorized user is always advisable.

Steps to Add an Authorized User

Adding a child as an authorized user is initiated by the primary cardholder, typically through online banking, a mobile app, or customer service. The primary cardholder navigates to a section within their account management tools to add authorized users.

The primary cardholder provides specific information about the child, including their full legal name, date of birth, and sometimes their Social Security Number (SSN). Providing an SSN can help ensure the account is correctly linked to the child’s credit file, though it’s not universally required.

Age requirements for authorized users vary by issuer, with some setting minimums as low as 13 years old, while others may require 15 or 16. Some issuers do not specify a minimum age. After processing, a physical card with the authorized user’s name is typically mailed to the primary cardholder’s address.

Key Account Characteristics for Credit Building

The effectiveness of authorized user status in building a child’s credit depends on the primary credit card account’s characteristics and management. Payment history is the most significant factor influencing credit scores. Consistent, on-time payments by the primary cardholder positively contribute to the authorized user’s credit report.

Credit utilization, the percentage of available credit used, is another important characteristic. Maintaining a low credit utilization rate, generally below 30%, benefits credit scores. A high balance relative to the limit can negatively impact both the primary and authorized user’s credit scores.

The age of the account also plays a role in credit scoring models. Adding a child to an older, well-established account with responsible use can be advantageous, as the authorized user inherits this length of credit history. A higher credit limit can also help keep the credit utilization rate low if balances are managed responsibly.

Alternative and Complementary Credit Building Strategies for Children

Beyond authorized user status, other strategies can help a child establish or build credit. Secured credit cards require a refundable security deposit, which becomes the credit limit. Their activity is reported to credit bureaus, establishing payment history, and many transition to unsecured cards after responsible use.

Student credit cards are an option for young adults in higher education. These cards are designed for individuals with limited or no credit history and may offer rewards. Responsible use, including on-time payments and managing balances, helps build credit history reported to major credit bureaus.

Credit builder loans hold the loan amount in a savings account or CD until all scheduled payments are made. Each on-time payment is reported to credit bureaus, building credit. Once repaid, the borrower receives the held funds, minus interest and fees.

Once a child reaches legal age (typically 18) and has sufficient income, they can apply for their own credit products. Responsibly managing their own credit card or a small installment loan by making all payments on time and keeping balances low will directly contribute to building their independent credit profile.