Credit Cards

How I am helping my 2-year-old build credit

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My son should be in good shape to borrow as an adult.

Key points

  • Thanks to how credit scores work, even a two-year-old can have a good credit score.
  • By helping my son take advantage of my financial history, I am giving him an advantage.

Building credit can be challenging, especially if you start late. Without a credit card or other debt that shows you’ve borrowed and repaid money, it’s hard to build a solid history that makes companies want to lend to you. In other words, you may not get the credit you need to build credit.

The good news is that there are steps parents can take to ensure that their children can start life with a good credit score and don’t need to go through a period of struggle or rely on secured cards to get a credit history. I have taken one of the easiest but most important steps to help my son build credit even though he is only two years old.

My technique for helping my son build credit cost me nothing and only took a few seconds, but you’ll benefit from it for decades.

This simple step is helping me improve my son’s credit score

I simply contacted the issuers of several of my older credit cards with high credit limits and strong payment records. I then asked those companies to list my son as an authorized user on my credit card accounts. It only took a phone call (or, in some cases, logging into my account and applying online).

As soon as I added my son as an authorized user (I did so when he was a few weeks old), a credit file was created for him that listed this account as his. In other words, even though he didn’t have a month, he had the benefit of a credit history that spanned decades and showed 100% on-time payments.

Why does adding your children as authorized users help them build credit?

Adding your children as authorized users on your credit cards helps them build credit because of how the credit scoring formula works.

Your credit score is determined by:

  • Your payment history
  • The average age of your accounts
  • The percentage of your available credit that you use
  • The number of inquiries (applications for new credit)
  • The types of accounts

When my son was added as an authorized user, he benefited from having a higher average credit age, as well as a credit card with a high credit limit and a low credit utilization ratio. You also get a higher score because all payments have been made on time. There is no problem, because he is too young to use the card.

Any parent with a long-standing credit card with strong financial credentials can employ this technique, and their children can build credit on the backing of their parents’ loans. It’s worth considering, because it can make it much easier for your child to start their financial life.

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