How to Help Your Kids Build Credit Early

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One of the most important, but often neglected, financial tasks that most young people should focus on is building a strong credit history. An individual’s credit history will impact every aspect of his or her financial life — from buying a house or car to renting an apartment and maybe even getting a job.

Start Out as Authorized Users

At what age should your children start building their credit history? While 18 is the minimum age for obtaining a credit card, they don’t have to wait until they’re 18 to get started. There is no minimum age for becoming an authorized user on a parent’s credit card, so Frontier asks that you consider allowing your teenage kids to become authorized users on your credit card account.

As an authorized user, they will usually receive their own credit card with their name on it that’s tied to your credit card account. Any purchases they make will appear on your account statement and you will be legally obligated to pay for them. So while this isn’t the same from a credit-building standpoint as having their own credit card account, it’s a great starting point.

Once your children turn 18, they can apply for a credit card in their own name. It might be a good idea for them to apply for the same type of card you have that they have been authorized to use. The credit card issuer will see that they’ve been an authorized user on your account, which could help increase their chances of approval.

If your child isn’t approved for a credit card in his or her name due to a limited credit history, you might consider co-signing on a credit card application with your child. If you do so, though, keep in mind that you will also become legally liable for your child’s debt should if he or she is ever unable to pay.

A Basic Credit Card Education

Having a credit card account in his or her own name is a big financial step for any young adult. Therefore, you should provide your child with a basic education about how credit cards work and explain the financial dangers that may exist if credit cards aren’t used wisely. For example:

  • Explain how interest charges accrue if the balance is not paid in full each month. Over time, the amount of interest paid can end up being more than the purchase price of the items bought.
  • Make sure they understand that the minimum monthly payment is just that: the minimum amount of the balance that must be paid. Unless the entire balance is paid in full each month, interest charges will accrue.
  • Encourage your children to always make sure they have enough money in a liquid savings account to pay their credit card balance in full every month. This will help them guard against carrying costly high balances and instead use the card as a tool to build their credit and perhaps receive rewards.

A Few More Tips

Before they apply, it’s a good idea for your kids to review their credit report if one exists. They can receive a free credit report from one of the major credit bureaus (TransUnion, Equifax and Experian) once a year by visiting www.annualcreditreport.com.

It’s also usually smart for young adults to start out by applying for just one credit card. Applying for multiple cards and/or opening multiple credit card accounts right out of the gate can have the opposite effect and actually damage your child’s credit score. One credit card is usually enough to satisfy the purchasing needs of most young people.

Finally, make sure your children know that you’re available if they ever have questions about how to use their credit card or how the card works. Helping your teenage kids understand how to build a strong credit history by using their first credit card wisely is one of the most valuable financial lessons you will ever teach them.

Please contact us if you have more questions about helping your children build a strong credit history.


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

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