A back-to-school credit lesson, by 720 Credit Score
My two oldest kids started school this week, and it reminded me that this is a good time for a lesson about helping children build great credit scores…
So here goes…
Basically, I think you should make your children authorized users on your credit cads.
A lot of people think this is totally crazy, but unless parents decide to make a concerted effort to begin teaching their children about credit, how else will they learn?
Our banks, educational institutions, and government officials tell us virtually nothing about credit.
Did you learn in school that no credit is just as bad as bad credit?
Did they tell you that you might not be able to rent a place to live unless you had a great credit score?
Did they tell you that you would pay hundreds and maybe even thousands of extra dollars each year if you didn’t have a 720 credit score?
No, they didn’t.
The job of teaching kids about credit belongs to parents.
And I think the way to do it is by adding your children as authorized users to one of your credit card account…
So long as it is in good standing.
When you add your children as authorized users, they are given the opportunity to “borrow” your history on that credit card.
Which means their scores will start to build.
If you don’t do this, consider what will happen…
Your children will enter adulthood with poor credit scores.
And since poor credit is just as bad as bad credit, they will pay sky-high interest on their first credit cards.
They will have a hard time getting a job or renting an apartment.
And they very well might get taken advantage of by lenders.
Helping them build their credit scores now, while they are at home, means they can enter adulthood one, two, or ten steps ahead.
Now, that said, I don’t think you should give your kids a physical credit card.
When you establish your children as authorized users, request that the credit card company not issue a card to your children, or simply shred the credit card when it arrives.
In this way, your children’s credit scores will benefit from the behavior on your account, and your credit will be protected.
Now, this is just part one of teaching your children about credit.
Stay tuned because next week, I’m going to tell you part two about my plan for teaching children about credit. In the meantime, read this article if you want to learn more about authorized user accounts.