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How to Help Your Child Improve a Fair Credit Score

Jan. 5, 2015
Credit Score, Personal Finance
How to Help Your Child Improve a Fair Credit Score
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There are many ways you as a parent can set your child up for success, including helping him or her to improve from fair credit to good — or even excellent. This will help make your child’s financial future easier.

Here are two simple ways for you to help build your kid’s fair credit score into something better. Use your best judgment based on your child’s age, history of financial responsibility and how often he or she uses a credit card to decide what option is best.

Make your child an authorized user

One way to help elevate your child’s fair credit score is to make him or her an authorized user on one of your credit cards. With this method, your child will get a card with his or her name on it, but you’ll be responsible for paying off the card balance. By paying off the statement completely by each month’s due date, your — and your child’s — credit will be positively affected. This is a good option if your child is younger and less responsible or needs the card mainly for emergency expenses.

Co-sign a fair-credit credit card

If you want your child to have his or her own credit card, you will likely need to co-sign for one. Since your son or daughter already has fair credit, the options will be restricted to credit cards for people with fair credit. This means the interest rates and credit limit may not be as favorable as cards available to those with good credit. However, you can use fair-credit credit cards to boost your child’s credit score and they will eventually be eligible for better cards.

By co-signing your child’s card, you commit to paying the card’s balance if your child does not do so. Unlike when you make your child an authorized user on your credit card, you will have little control over this account. A co-signed credit card is probably a better option for an older or more responsible child whom you can trust to pay off the balance on time and in full each month — otherwise, your own credit may suffer.

Whichever of the above routes you choose to take, this is a great opportunity to educate your child about responsible financial habits and the effect they have on fair credit.

Before you give your child access to a card that ultimately you could end up paying for, take the time to explain what you are doing and why. Make sure your son or daughter knows the financial consequences — both short- and long-term — of irresponsible use of credit cards. By taking these steps, you will have helped set your child up for a secure financial future.

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