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No, Your Newborn Doesn’t Need to Be on Your Credit Card Account

Nov. 15, 2016
Credit Card Basics, Credit Cards
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Savvy parents often help their children build credit by making them authorized users on existing credit card accounts. If you have kids and a credit card account in good standing, you may have considered doing this yourself.

The question is, when should you add them to the account? The answer: When you think they’re old enough to understand how credit works and can start using credit responsibly. Don’t feel rushed. Because of the way authorized user status works, there’s no real benefit to adding them before they’re good and ready. You won’t give your kids a “head start” by adding them to your credit card while they’re still in elementary school. Or in diapers.

Why does authorized user status help?

When you add your child as an authorized user, the credit card issuer will send you a card with the child’s name on it that’s linked to your account. You’re still the responsible party, so it’s on you to monitor your child’s spending and pay the bills. If a bill goes unpaid, your credit will suffer.

To a potential future lender, landlord or even employer, seeing that your child is an authorized user is an indication that they’ve had strong financial guidance, even if they don’t have any credit card accounts in their name only. They’ve had practice using credit, and you’ve been there to make sure they don’t overspend or behave irresponsibly.

There’s one other big factor to consider. You’ve got something your child doesn’t, and that’s longevity. Credit scoring models take the average age of a person’s credit accounts into consideration. If you add your child to a credit card account you’ve had for a long time, that lengthens the average age of their accounts. That’s good for their score, even if they eventually open new credit cards on their own.

Nerd tip

Most major credit card issuers report authorized user status to the credit bureaus, but some issuers do not. If they don’t report it, then it can’t help your child’s score. See our list of issuers that report authorized users.

When should your child become an authorized user?

Even though the longevity of the account can help your child’s credit, it doesn’t matter how long the child has actually been on the account, says Nancy Bistritz, a spokesperson for the credit bureau Equifax.

“The person who becomes an authorized user would benefit from the age of the account, regardless of when they were added,” she says.

Bistritz gives an example: “If the primary account holder opened the account in the year 2000, and then decided to add an authorized user in the year 2016, that authorized user would benefit from the account opening that occurred in 2000.”

That means there’s no reason to add very young children to your credit card accounts. You can wait to add them until they’re old enough to learn about credit. Their credit histories will have the benefit of your more mature financial track record, and they’ll have the benefit of your wisdom. Getting them to listen to your advice is another matter entirely.

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Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email: [email protected] Twitter: @vcmcguire.