Five Ways to Help Your Teenager Establish Credit

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It’s critical that young people learn early on about the importance of managing debt and begin the process of establishing credit in their own names. Ideally, this education process should start during their teenage years, and they should begin establishing their own credit before leaving home to start their career or graduating college.

Starting out their adult life with strong credit will go a long way toward helping teenagers get off on the right foot financially. Here are 5 things you can do to help your teenager establish credit:

  1. Encourage your teen to get a job. Many parents give their kids an allowance starting as early as elementary school to help them start learning the basics of money management. Once they become teens, many kids are ready for a job outside the home to get their first taste of the real working world.

There’s nothing like getting a real paycheck to teach teens the value of being financially rewarded for working hard. This is also the first step toward your teenager establishing credit in his or her name, since an employment record is one factor that’s considered in each person’s credit score.

  1. Open a checking and/or savings account in your child’s name. Your teen may need to have a checking or savings account at a bank or credit union in order to receive payment from his or her employer via direct deposit. Even if not, opening an account is a good early step toward establishing credit because it helps demonstrate financial responsibility.

Opening a checking account can also teach your teen how to use a debit card responsibly since this type of card is included with most accounts. For example, your teen will learn the importance of keeping track of how much money is in the account in order to avoid overdrawing the account and incurring overdraft fees.

  1. Name your child as an authorized user on your credit card. While making timely payments on a credit card is one of the best ways to establish credit, teenagers usually will not qualify to receive a credit card in their own name since they haven’t established any credit yet. Naming your child as an authorized user on your credit card is one solution to this Catch-22.

As an authorized user, your teen will have permission to use the credit card to make purchases. However, you — not your child — will retain legal liability for the debt. Being an authorized user will enable your child to start building his or her own credit history.

  1. Help your child obtain a secured credit card. Even with a limited credit history as an authorized user on your credit card account, your child still might not qualify for his or her own unsecured credit card. The next best thing might be to apply for a secured credit card.

With this type of card, a deposit must be made into a bank account to serve as collateral for the card. The amount of the deposit is the amount of the credit line — for example, if $250 is deposited into the account, the credit line will be $250. Your child can then use this unsecured credit card to make small-dollar purchases up to the credit limit in order to establish credit and build a credit score.

  1. Obtain your child’s credit report and review it together. Once your child has obtained a secured or unsecured credit card in his or her name and used it for about six months, order a credit report to see what your child’s credit score is. You can order a free copy of your child’s credit report from each of the major credit reporting bureaus (Experian, TransUnion or Equifax) once a year by visiting www.annualcreditreport.com.

These first credit reports will reveal your child’s initial credit score. Review the reports carefully together to make sure they’re accurate. If you spot any errors, contact the credit reporting bureau directly to have them corrected. 

Building and maintaining strong credit should be a top financial priority for all young people, including teens. Give us a call if you would like to discuss helping your teenager establish credit.


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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