3 Ways to Help Your Child Build Great Credit

SEATTLE (Creditnet.com) -- Responsible parents should want to make sure their children understand how to build credit. Like it or not, credit scores are a big deal, so why not teach your kids how to embrace them instead of ignore them?

For some parents it might seem easier to just avoid the whole credit issue. After all, credit cards can be dangerous in the hands of a teenager who doesn’t understand how they work. Other parents may understand the importance of helping their children build a solid credit history, but remain unsure about how to do it while protecting their own credit scores.

Wherever a parent stands on the issue, here are three easy ways to help your child build great credit from a young age. Follow these tips and your children should find themselves on financially sure feet relative to peers by the time they reach college. You won’t regret it, and your children will thank you.

1. Start young by opening a checking account and using a debit card

While a checking account and debit card won’t technically improve your child’s credit, the key to building a great credit score lies in establishing solid money management skills at a young age.

Help your child set up a free checking account in their own name, have them regularly deposit any money earned, and teach them how to use a debit card to make purchases. Once your child learns how to spend wisely and to avoid declined debit card charges, they have already mastered the basic skills of responsible credit card use.

2. Add your child as an authorized user on one of your credit cards

“Piggybacking” still works! Don’t let anyone try to convince you otherwise. Parents have been using this tool for a long time to help their children build good credit scores, and you should too.

What you need to do is determine which of your credit cards in good standing is the oldest with a low credit utilization ratio, preferably 10% or less. Then make a phone call to your credit card issuer and add your child as an authorized user on the card. This will in no way affect your credit score, but as long as you continue to keep your credit utilization low and pay your bills on time, the account should show up on your child’s credit reports and give their score a significant boost.