What Is the Best Way to Help My Kid Build Credit With a Credit Card?

Building a child's credit report and score from an early age is essential. Credit matters more in the 21st century than it did in the 20th century. Housing, employment and finances can all hinge on this report. Fortunately, you can easily begin building your child's financial health. This will pay dividends as the child develops into adulthood.

Instructions

1

Review your current credit card account agreements. If you do not have these on-hand, contact your lender to obtain a copy or simply ask the credit representative if that particular company allows authorized users on their accounts. An authorized user can access the funds on the credit card, but is not subject to payments.

2

Add your child as an authorized user on your credit account. You should be able to set the credit limit for her card. Make the credit limit low at first, so as not to tempt her into large purchases.

3

Have a discussion with your child about responsible spending and credit use. Talk about never borrowing more than one can afford, the danger of minimum payments and the necessity of on-time payments. Encourage your child to use the card for simple purchases--like gas.

4

Establish a repayment plan on your own. The child is not responsible for repaying the lender, but he only will learn if you force him to repay you for the purchases made. While the credit card will continue to build his credit (so long as you are making on-time payments), he will not learn responsible borrowing unless you establish repayment plans.

5

Sign your child up as a co-borrower when he turns 18. This will keep him on your account, but it will also obligate him to repay the credit card.