How to Build a Credit History for Your Child

June 6, 2024

Few things will impact your child’s life and lifestyle like their credit history. It will influence whether they get approved to rent an apartment, finance a car, purchase a home, and so much more. In a way, it’s how people will vet them. So, if their credit history is questionable, they might not be able to live the lifestyle they want — or that you want for them.

A strong credit history can take years to build. This can make the early adult years particularly difficult. But it doesn’t have to. You can actually build a credit history for your child while they’re still living at home with you, gifting them a running start for when they leave the nest.

What Does Your Credit Score Start At?

A credit score is a numerical indicator of someone’s creditworthiness based on their credit history. So, until your child has a credit history, they won’t have a credit score. This doesn’t mean their credit score is zero, however. Their credit score simply doesn’t exist.

Generally, the lowest possible FICO Score is 300. The maximum is 850. When your child starts establishing a credit history — either in adulthood or, with your help, earlier — it’s highly unlikely that their first credit score will be at either extreme. But you can still influence how high it is.

Since your child’s credit score will be based on their credit history, starting off with good credit habits, such as paying every bill on time, can lead to a great score. Conversely, starting off with bad credit habits can lead to a poor credit score.

So, if you want to set your child up for financial success, building their credit history on good credit habits is better than building just any credit history. One way to start is by simply adding your child as an authorized user on your credit card.

Do Authorized Users Build Credit?

If you have a credit card, you may be able to build your child’s credit by adding them as an authorized user. As an authorized user, they would be able to use the card, but they wouldn’t be legally responsible for the bill. And even if they aren’t responsible for the payments, the payment history you establish with this credit card account will go on their credit history just like it goes on yours.

It’s important to remember that a negative payment history will build a bad credit history for your child just like a positive payment history will build a good one. Your child’s credit history will be built on your credit habits, for better or worse. So, if you’re still working on your own financial discipline, it’s probably smart not to add an authorized user just yet.

It’s also worth noting that this tactic doesn’t work with every credit card company. It only works if your card issuer reports authorized user accounts to the three major credit bureaus — Equifax, TransUnion, and Experian — and not every issuer does. It’s best to do your due diligence and research your card issuer’s reporting practices before adding your child as an authorized user.

What Are the Types of Credit Scores?

There are multiple credit scoring models in existence, resulting in many types of credit scores. Fortunately, you don’t need to learn them all. Because out of all the options, there are just two main models lenders use most: FICO credit scores and VantageScore credit scores.

In the U.S., 90% of top lenders rely on a FICO Score. So this score is used for everything from an installment loan to a credit card, mortgage, and more. VantageScore is the result of a collaboration between the three major credit bureaus, and it’s also widely used. Both credit score models consider the same factors in calculating a score, though they weigh these factors differently. They also both tend to have a credit score range of 300 to 850, though their standards differ. 

FICO credit scores have the following ranges:

  • Exceptional: 800 – 850
  • Very Good: 740 – 799
  • Good: 670 – 739
  • Fair: 580 – 669
  • Poor: 300 – 579

VantageScore credit scores have these similar ranges:

  • Excellent: 781 – 850
  • Good: 661 – 780
  • Fair: 601 – 660
  • Poor: 500 – 600
  • Very Poor: 300 – 499 

Checking one or both of these scores every now and then is a great way to gauge how well you’ve built your child’s credit history. And your own.

Can a 17-Year-Old Get a Loan with a Co-Signer?

As a general rule, minors can’t take out loans without a co-signer. As with any rule, of course, there are exceptions. For instance, if you have a child who graduates from high school early, they can still take out federal student loans to help pay for college. Overall, however, lenders prefer to lend to adult borrowers. Case in point? Private loan providers don’t lend to minors on their own — even if it's to pay for school — but many lenders allow a 17-year-old to get a loan with a co-signer.

Of course, being a co-signer on your child’s loan comes with legal responsibility. If your child, the primary borrower, falls behind on payments, the burden of those missing payments will fall to you. As long as you trust your child and are fine with this risk, however, being a co-signer on the loan can help them get it approved easier, especially if you’re still helping build your child’s credit history.