Teens & Credit

It is important to teach teens about credit so they can make good financial decisions and avoid debt problems – now and in the future.

The most important thing you can do to help your child build credit is to teach him or her to manage money responsibly. Those skills and habits go a long way towards reaching a good credit score. There are a few ways to help your teen build credit:

  • Add your child as an authorized user or a joint account holder or on your credit card. Of course, for this to work, you have to pay the credit card bills on time; otherwise, you will end up hurting your child's credit.
  • Teach your children to use credit responsibly, even before they have their own credit card. For example, as an authorized user on your account, your child should avoid charging more than he or she can comfortably pay off in full each month, and balances should be kept well below the credit limit.
  • Some 18-year-olds can get credit cards, but most need an adult cosigner until they hit 21. They’ll need a steady source of income (allowance doesn't count) to prove they can pay off the debt. Instruct your teen to avoid applying for multiple cards (even if the deals look great) – doing so can lower your score dramatically since you’ll appear desperate for credit.
  • Consider retail and gas cards since they are typically easier to get approval for than a Visa or MasterCard. Be sure to ask if the card requires payment in full each month or if it allows minimum payments. If the card must be paid in full each month, it may not be reported as revolving, and therefore will not help your teen's credit (encourage your child to pay off in full each month even if it’s not required).
  • Make sure your teen pays all his or her bills on time – every time.

It’s important to note that most prepaid credit cards and debit cards won’t help your teen build credit.

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