A Guide To Your Child’s Credit Report: Pros and Cons

A credit report is issued once you have debt and payment history, what and when you borrowed and how you can pay back the debt.

How early can a minor have a credit report? Technically, credit reports can be started for children of any age if they are authorized users of their parents’s credit cards. Most major credit card companies will allow you to add your teen as an authorized user and may impose a minimum age. Some companies do not have minimum age limits at all.

Having a good credit score at an early age is a good strategy. Parents increasingly are making their children authorized users of their cards. Authorized users piggyback on the credit of the parent but are not responsible for paying the bill. There may be some fees to pay for this benefit.

Being an authorized card user of a parent’s card with not such a great credit score could expose your user to a bad start in credit. A parent’s late payment will impact not only their score but their offspring’s as well.

Alternatives to authorizing your young user? A prepaid card from a credit card company may be arranged for someone as young as 13 years old. This may be an interim step, like putting a child on credit training wheels and allowing them to spend wisely and within limits based on the amount on the card. Prepaid cards are more like debit cards, and they will not affect your teen’s credit scores one way or another.

Once your teen turns 16 years old, it is probably a good idea to check their credit history. Three possible outcomes. Your teen has:

1) no credit history. This is totally normal and expected. It is a good time to talk about being credit responsible and consider ways they might start building up their credit like getting a job or give them that Netflix bill to pay.

2) a legitimate credit file. Check the information on the credit report. Oh yeah, your teen is an authorized user on your credit card and should trigger a credit report that is accurate and in your teen’s name. Make sure there aren’t any unusual marks on the report. If there are items that are not related to your credit card, or incorrect spelling or the wrong address, you need to clean it up.

3) a credit file due to fraud. You start to get the sweats! There may be one or more accounts listed on your teen’s credit history. Someone could have opened credit cards, loans, or borrowed in your teen’s name.

Explain that your child is a minor and as such, cannot enter into legal contracts. At most, it is a voidable contract, and can be voided at the minor’s option. Full contractual capacity occurs upon your child’s 18th birthday in most states. Ask the companies to close the fraudulent account and send you a letter confirming your child isn’t liable to the company.

Swipe Up to Read More about  A Guide To Your Child’s Credit Report: Pros and Cons