Listen to the audio version of this article.
In today’s financial landscape, establishing a solid credit foundation early can set young individuals up for future success. While minors under 18 can’t open their own credit accounts, there are several ways parents and guardians can help build their child’s credit. Here’s a comprehensive guide to building credit for minors.
Become an Authorized User
The most common and effective way to build credit for minors is by adding them as authorized users on a parent’s or guardian’s credit card account.
- Many major card issuers allow this, with some having minimum age requirements:
- American Express: 13 years old
- Discover: 15 years old
- Bank of America, Citibank, TD Bank, and Truist: No minimum age
- Benefits:
- The minor shares the account holder’s credit history
- Helps establish a credit report for the child
- Can potentially lead to a good initial credit score
Educate About Credit Basics
While not directly building credit, educating minors about credit fundamentals is crucial:
- Teach the importance of credit scores
- Explain how credit works and its impact on future financial decisions
- Discuss responsible credit use and the consequences of mismanagement
Open Checking and Savings Accounts
Although these accounts don’t directly impact credit scores, they help develop financial responsibility:
- Teach budgeting and money management skills
- Familiarize minors with banking practices
- Some banks offer teen-specific accounts with parental oversight
Monitor Credit Reports
Regularly checking a minor’s credit report can help catch and address any errors or fraudulent activity:
- Parents can contact the three major credit bureaus to check their child’s credit
- Minors can check their own credit reports starting at age 14
Consider Alternative Credit-Building Products
Some financial technology companies offer innovative ways for minors to build credit:
- Step: A financial technology company that allows teens to build credit history before 18
- Greenlight: While not a credit product, it offers a debit card for teens with features to teach financial responsibility
Prepare for Future Credit-Building Opportunities
While these options aren’t available to minors, parents can prepare their children for these opportunities when they turn 18:
- Secured credit cards
- Student credit cards
- Credit-builder loans
Conclusion
Building credit for minors requires a combination of strategic financial moves and education. By adding them as authorized users, teaching financial responsibility, and utilizing innovative financial products, parents can help their children establish a solid credit foundation before they reach adulthood. This early start can lead to better financial opportunities and decisions in the future.
