Increasing your child’s credit score

You may want to give a jump-start to your child’s credit history and financial health. One good way to help them out is by adding them as an authorized user on your credit card. This, generally is a two edge sword, giving the ability to spend money to kids can result in unexpected avenue of expenses but at the same time, it may also teach them to be more responsible.

Now, before you go and add your toddler to your credit card as an authorized user, there are a few considerations that you need to be aware of. Most card issues have restrictions on who can be added as an authorized user on their card. These are the restrictions of some common issuers.

BankMinors allowedMinimum ageDOB RequiredSSN Required
American ExpressYes13YesYes
Bank of AmericaYesNoYesNo
Capital OneYesNoYesYes
ChaseYesNoNoNo
CitiYesNoYesNo
DiscoverYes15YesYes
US BankYes16YesYes
Wells FargoYesNoYesNo

Considerations to add your child as an authorized user

There are further considerations apart from whether you bank allows you to do it or not. The other things you need to be aware of are:

  • Some issuers would require your child to be at the same address as you
  • Do check the issuer if there are any additional charges for authorized users. Many cards (esp. those with an annual fee) tend to have charges for the authorized user cards
  • Most issuers would report an authorized user account on the user’s credit file, but this may have an added impact. Many issuers would report both positive and negative items so if you are not a good manager of credit, it may actually show up on your child’s credit report. Ensure that you keep your usage in check as well.
  • Lastly, most issuers provide the guest / authorized user card with the same card number as the primary. This may make it challenging to track usage between users (if that is a need). It also means that if any card is lost, and a freeze is requested, all cards (since they have the same number) would get blocked.
  • Now, the above limitations can be bypassed by using Business credit cards, though they do increase the costs involved.

Considerations while removing your child from your card

This is even more interesting than adding your kid to the card. Adding the kid is an easy decision. Removing your child gets more tricky.

Removing the child is as simple as calling the card issuer (and some even allow it from their website). The moment an authorized user is removed, the issuer stops reporting the card on their profile. This may reduce their available credit and may drop their score as well as reduce the overall age of credit.

The best strategy would be to let them get their own card(s) and use it for at least a couple of years. That way, the dependence on the authorized user card for credit score would come down drastically and allow them to be removed without a substantial hit.

If done properly, it would allow your kid to get more credit at a better rate and even a good mortgage at good rates in their early 20s

The guy next door
Dee is a technologist and a personal finance hobbyist. With over 15 years of experience in the financial domain, Dee started following the philosophy of FIRE since 2016 and is on track to reach the goal of FIRE in 10 years. He wants to teach you on how to achieve Financial Independence within a decade. All content on this site is an opinion and is for information purposes only.  It is not intended to be investment or tax advice.  Seek a duly licensed professional for investment and tax-related advice

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