Building Your Teen’s Credit Score

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. That’s why it’s so important for teens to start building their credit score before they move out. You can help prepare them for this in the years leading up to graduation.

Sign Them Up for a Debit Card or Retail Credit Card

Getting your teen started with their own bank account is a great way to begin building their credit score while still having a safety net. Teens under 18 can sign up for a debit card as long as they have a co-signer. Since you’ll be co-signing, your personal account will be linked to theirs to cover any overdrafts.

If a debit card isn’t the right fit, consider signing them up for a retail or gas credit card. Jean Folger from Investopedia suggests these as good options since they’re easier to get approval for. She recommends asking whether the card requires payment in full each month or allows for minimum payments. Cards that must be paid in full may not count as revolving credit, which won’t help build your teen’s credit score. Regardless of the type of card, Folger encourages teens to pay off their balances in full every month.

Teach Them Credit Card Basics

Credit cards come with more responsibility than debit cards, so it’s essential to teach your teen the basics before signing them up for their own. While this is a bigger step, it can significantly boost their credit score as long as they consistently pay their bills on time and in full. Paying the balance in full is the most important habit teens can develop, even if they start with a small credit limit.

Monitoring your teen’s credit card activity can also help ensure they’re on the right track and not accidentally hurting their credit score before they’ve had a chance to build it.

Add Them as a Joint User

If you’re not ready for your teen to have their own credit card just yet, consider adding them as a joint or authorized user on your account. This gives them access to a card they can use for emergencies or everyday purchases. If you’d prefer, consider adding your teen as an authorized user without giving them the physical card.

However, be aware that if your credit score isn’t in great shape, it could negatively impact your teen’s credit.

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