How to Build Your Child’s Credit Before 18

Building a strong credit history early can provide a significant advantage for a child’s future financial journey. Credit serves as a measure of an individual’s financial trustworthiness, reflecting how reliably a person manages their financial obligations, such as repaying borrowed money. This trustworthiness becomes a foundational element for various major life events, including securing housing, obtaining loans for education or a vehicle, and even some employment opportunities. Establishing a positive credit profile from a young age can set the stage for long-term financial stability and open doors to more favorable financial terms later in life.

Fundamentals of Early Credit Development

Understanding how credit scores are developed is important for anyone considering early credit building for a minor. A credit score, such as a FICO Score, is a numerical representation derived from information within a credit report. These scores typically range from 300 to 850, with higher numbers indicating lower credit risk. Several factors influence a credit score, each carrying a different weight in the calculation.

Payment history holds the most weight, accounting for approximately 35% of a FICO Score, emphasizing the importance of timely payments. The amounts owed, or credit utilization, represents about 30% of the score and assesses how much available credit is being used. A lower utilization rate, ideally below 30% of the total credit limit, is generally viewed favorably. The length of credit history contributes approximately 15%, with older accounts and a longer history generally being beneficial.

New credit inquiries, accounting for about 10%, reflect recent attempts to open new credit accounts, which can temporarily lower a score. Lastly, the types of credit used, also about 10%, considers a mix of different credit products, such as revolving credit (like credit cards) and installment loans (like student or auto loans). While these factors are universally applied, traditional credit products like personal loans, mortgages, or standalone credit cards are generally not available to individuals under the age of 18 due to legal restrictions. This necessitates alternative strategies for minors to begin building a credit history.

The Authorized User Strategy

A common and effective method for building a child’s credit before they turn 18 involves adding them as an authorized user on a parent’s existing credit card account. An authorized user is permitted to use the primary cardholder’s credit card, but they are not legally responsible for the debt. The activity of this account, including payment history and credit utilization, can then be reported to the authorized user’s credit report.

The success of this strategy relies on the primary cardholder’s responsible credit behavior. Consistent on-time payments and maintaining a low credit utilization rate on the account are crucial, as these positive actions will reflect on the child’s credit report. Conversely, late payments or high balances on the primary account can negatively impact the authorized user’s developing credit profile. It is important to choose a credit card account with a long, positive history and a low outstanding balance.

To add a child as an authorized user, the primary cardholder contacts their credit card issuer. This can often be done through an online portal, a mobile app, or by calling customer service. Issuers generally require the child’s full name, date of birth, and sometimes their Social Security Number (SSN) to add them to the account. Some card issuers may have minimum age requirements, though many allow minors as young as 13.

Once added, the credit card issuer may send a physical card in the child’s name, though receiving a card is not always necessary for the credit reporting to occur. The account activity typically appears on the authorized user’s credit report within 30 to 60 days. Parents should establish clear guidelines with their child regarding the use of the card, if a physical card is provided, to ensure responsible spending and prevent overspending that could lead to high utilization or missed payments on the primary account.

Monitoring and Securing Your Child’s Credit

Once a child’s credit-building journey begins, ongoing monitoring is important to ensure accuracy and protection against potential identity theft. Parents should regularly check their child’s credit report for any inaccuracies or suspicious activity. Although minors typically do not have credit reports unless they are authorized users or victims of identity theft, it is prudent to verify.

Parents can obtain a free copy of their child’s credit report by contacting each of the three major credit bureaus—Equifax, Experian, and TransUnion—directly. This process usually requires providing documentation such as the child’s birth certificate, Social Security card, and proof of the parent’s identity and address. Annually checking these reports allows parents to identify any unauthorized accounts or incorrect information that could indicate identity fraud.

A proactive measure against identity theft is to place a credit freeze on a minor’s credit report. A credit freeze restricts access to the credit report, making it difficult for new credit accounts to be opened in the child’s name. This is particularly beneficial as children generally do not need active credit files. The process involves contacting each credit bureau individually and providing similar identifying documentation as required for obtaining a credit report.

The freeze remains in place until it is lifted, typically by the parent or guardian, or by the child once they reach a certain age, often 16 or 18, depending on the bureau. Beyond these protective measures, continuing financial education for the child is important. Teaching responsible spending habits, the importance of saving, and how credit works reinforces the positive foundation being built and prepares them for future financial independence.