This 'stepping stone' strategy helps parents boost their kids' credit score. Here's how it works
Parents who want to help jumpstart their kid's credit score and credit history can take one fairly easy step, money experts say: Add your child as an authorized user to your credit card account.
The goal is to have a child build credit from a relatively early age by piggybacking off their parent's — i.e., the primary account holder's — good credit.
The strategy is generally best for kids in their later teenage years, maybe around 16 years old, or even those in their early 20s, said Ted Rossman, a senior industry analyst at CreditCards.com.
Parents can think of it as a «stepping stone» to building credit, he said.
«It's gotten harder to establish credit in your own name, and this is one of the tools to get around that,» said Rossman. «It can really help a lot.»
Allowing kids to use a credit card — and showing them how to pay off the debt responsibly — can also «help them learn healthy credit card management skills early on,» said Andrea Woroch, a consumer finance expert.
Credit scores range from 300 to 850. Lenders typically consider the best ones to be in the low 700s and higher.
Many factors determine one's credit score, like bill-paying history and how long someone has had an account open.
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Securing good credit early in one's career can yield many financial benefits, like helping to qualify for a loan or line of credit, and getting a lower interest rate on that debt.
Landlords, utility providers, cell phone companies and prospective employers, for example, also generally run credit checks when vetting applications.
Parents should
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