What Parents Can Do To Help Their Children Build Credit

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Parents want their children to succeed. That starts with a nurturing home environment followed by a quality education. All the while, moms and dads trickle little life lessons into the minds of their kids to help them grow into successful adults.

Unfortunately, many parents fail to teach their children the importance of credit. Most teenagers enter adulthood with only a vague understanding of personal finance. What’s more, they’re expected to jump headfirst into the world without any credit history.

If you want your child to succeed in this world, you must teach them the basics of personal finance. Parents can do this – in part – by helping their kids establish a positive credit history.

With this in mind, let’s take a look at five things parents can do to help their children build credit:


As mentioned in the introduction, teaching your kids about personal finance is the first step toward helping them build credit. Explain the ins and outs of budgeting, saving, and spending within their means. Once they understand those concepts, shift gears and talk about credit scores and credit history.

Teach them what it is, how it works, and when it matters. Draw from personal experiences to paint a vivid picture in their heads of what good credit means and how bad credit makes life difficult. Finish by telling them how various money moves will put them on the path to building a good credit history.

Don’t be afraid to use technologies like online courses, personal finance blogs, money applications, and teen debit card accounts to enhance your understanding of financial management practices.


Now it’s time to put those money moves into practice. Start by making them authorised user on one or more of your credit card accounts. This is known as the piggybacking credit approach to building credit. Assuming the account holder has good credit, this arrangement will generate positive credit history for the authorised user.

It’s also a good way for teenagers and young adults to practice all that financial wisdom you’ve been sharing by using credit cards in a limited fashion for important purchases. If piggybacking sounds like an option for you and your teen, remember to set ground rules. Give them a set limit and due date. You should also discuss the consequences if they don’t manage your credit card responsibly.


Another way parents can help their kids build positive credit history is to act as co-signers for a loan in their name. It could be a personal loan, student loan, or car loan. By co-signing, you enable them to access financial instruments they would otherwise be unable to access due to their lack of credit history.

Assuming the loan is paid back on time, this arrangement will significantly boost their credit score. Co-signing has the added benefit of helping your child get ahead in life courtesy of a college education and personal vehicle. It’s important to note that as a co-signer, you’re legally responsible for the loan being paid in full. Therefore, you should set ground rules before signing a loan with your teenager.


How credit scores are calculated can seem confusing to those who have little experience. As a parent, consider monitoring your child’s credit on their behalf. They should also monitor their credit, but you can spot potential problems they may otherwise miss.

In doing so, you can help them avoid situations that would harm their credit in the future. For instance, you might see they’ve applied for more than one credit card in a short amount of time. By stepping in to ensure they wait a while before applying for another one, you help prevent the dip that comes when people have their credit checked repeatedly.

Although monitoring your teen can be beneficial, you must balance offering your advice and giving them room to make mistakes. While you’d like to prevent your teen from going through financial struggles, sometimes experience is the best teacher.


Learning from our mistakes is a fact of life. With this in mind, parents might be understandably hesitant to bail their kids out of the financial jams they get themselves into. However, that could undo all your hard work to help them build good credit. While there should be a limit to your generosity – mainly when their money problems are rooted in poor financial decisions rather than bad luck – there’s nothing wrong with making sure their bills are paid when they’re in between jobs or down on their luck.

As parents, we want what’s best for our children. That includes setting them on a path to success. To help them have the best chance to succeed, we need to make sure they understand the basics of personal finance. What’s more, we should do what it takes to help them build good credit history. That way, they can hit the ground running to pursue their dreams.

Ref: 3069.26923

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