We've discussed in previous posts how to start teaching your child financial responsibility through a bank account, but what about their credit score? Credit scores have such a huge impact on a child's financial future, and you can help them establish and build their credit from early on in preparation for future student loans, car loans, or other future financial endeavors!
photo from wix.com
Add your child as an authorized user on your credit card
While taking out a credit card usually has an age minimum, you can still add your minor as an authorized user on your card. You don't need to give them a physical card until you feel they are ready for the responsibility, but you are still helping them build credit simply by having their name as a user. Once they are older, you can get them a physical card and begin to educate them on healthy credit spending habits. Many parents choose to give their teens a credit card as an "emergency" card or for gas and groceries. Others ask their teen to contribute a certain amount toward the card each month to help them learn about paying bills and paying down debt.
Co-Sign on your Child's Credit Cards or Loans
Once your child is old enough or they are preparing to take out their first loan for college or a new car, you can co-sign on their loan to help them continue to build credit. This may be a requirement especially if they are a full-time college student. Unfortunately, financial literacy is not a widespread lesson taught in schools, so it is up to parents to teach healthy ways of handling money. A good credit score that was established young will help set your child up for future loans. In fact, 15% of your FICO score depends on the length of your credit history, so the earlier the better! It's not doubt that mistakes can happen, too, such as missing a payment, so a longer credit history can help overcome those obstacles.
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