Managing Your Child’s Credit

February 28, 2022 by First Federal Bank

ChildYou may not think you need to be concerned about your young child’s credit now, but identity thieves do not discriminate. They can target minors and wreak havoc on their credit before parents are even aware. So, it is important to work to protect your child’s credit history, before they need it.

When your teen finally takes the big leap and moves out of the house, they’re going to need a solid credit score for a lot of life steps: renting an apartment, getting a loan, or finding a good deal on insurance. For that reason, it is important teens build up their credit scores before they move out. There are a few ways you can prepare them for this in the years leading up to graduation:

Sign them up for a debit card

Getting your teen started with their own bank account is a significant step in building their credit score without ditching their safety net. A teenager under 18 years old can still sign up for a debit card; they just need a co-signer. Since you are co-signing on the card, your personal account will be linked to your teen’s in case of an overdraft.

Teach them the credit card basics

Credit cards are a bit more complex, so it’s important to sit down your teen and help them understand the basics. Be sure to discuss the differences between a card that requires payment in full each month and one that allows minimum payments. If the card must be paid in full each month, it may not be reported as revolving, and therefore will not help your teen’s credit/ Encourage your teen to pay off their debts in full each month once they are 18 and can apply for a credit card of their own.

Walk with them through the process

As a parent, it’s imperative you keep an eye on your teen’s progress. Without understanding the ins and outs of credit and the implications of not paying your credit card bills, a teen could end up damaging their credit score significantly. Follow up with your teen each month to make sure they paid their bill in full, they understand their responsibilities and they’re comfortable with the process.

Show your teen how you monitor your own bills and your credit score. If you build a good foundation before they leave the nest, you can set them up for financial success in the years ahead.

Categories: Financial Education, Kids, Family

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