Building a credit score can take some time. It takes about six months of credit activity to establish a credit score. More than 53 million Americans do not have a credit score. Also, individuals who are in the late teens have a lower score than those who are older. As parents or guardians, there are a few strategies you can implement to ensure your child has a better credit score.
Consider utilizing a secured loan for a large purchase
If you are in the market to make a large cash purchase for your child, consider using the money and obtaining a secured loan. In this way, the bank can use the funds as collateral. A loan can be made in the child’s name. This way, payments can be made monthly to help build your child’s credit score.
Add your child as an authorized user
Another great way to build your child’s credit score is to add your child as an authorized user to your credit card. The advantage of adding your child as an authorized user – if your credit history is strong and established, you can pass it on to your child to help jumpstart their credit score. Some credit card companies do not have an age requirement for children, and some start as early as 13 years of age. Of course, this can also be a disadvantage if the parent herself/himself have credit issues later.
Protect your child’s credit score
Also, as a parent, you may want to consider protecting your child’s credit score. According to Javelin Strategy & Research, more than 1 million children were victims of identity theft. Two-thirds of those victims were under the age of 7 years of age. One way you can protect your child’s credit is to consider a credit freeze. A credit freeze means that no one would be able to open credit in your child’s name – not even your child. You will be provided a one time PIN to utilize when you are ready to “unfreeze” the credit report.
Also, as a parent, you may want to monitor your child’s credit report annually. Consider checking their credit report on their date of birth. This way, you can track whether there has been any activity as it relates to your child’s credit report. Consider checking out annualcreditreport.com for free.