How to help children build credit at 18

As a parent, you always want to make sure your kids are on the path to a bright future—at work, at home and in life. Learning how to manage money and credit can be part of that. The Federal Trade Commission (FTC) says kids who have an understanding of money tend to have better credit scores as adults. And better scores can give them access to the best rates and terms on credit when they’re older. It could even help them when applying for a new job, apartment or cellphone plan. 

You know your teen best. So you can decide what’s appropriate for them based on their age, interests and development. But here are some ideas for how to get started helping your teenager build credit.

Key takeaways

• Having a checking or savings account can help kids practice skills that also apply to managing credit.
• You can make lessons about credit relatable by talking about how it helps with things like getting a phone or a place to rent. 
• Even before they start building credit, it’s a good idea to check your child’s credit report.
• When they’re ready, they could become an authorized user on one of your accounts or apply for a secured or student credit card.

Some people keep their spending money in a checking account and short-term savings in a savings account. Learning how to use and manage both accounts might teach your teen skills that could apply to managing a credit card. 

Once you think they’re ready, you may be able to open a bank account for your teen. As the joint owner, you can help monitor and manage the account. But you can make sure they’re able to have some control and get practice as well. 

The Capital One MONEY teen checking account is an option for parents or legal guardians and a child who is at least 8 years old. The account comes with a debit card that they can use, and there are no minimums or fees. It also includes tech tools to encourage them to start budgeting and setting goals—and to give parents access and oversight. 

If you have younger children, you don’t need to wait. You can start them with a Capital One Kids Savings Account and then add them to the teen checking account later.

Basically, having credit means you can borrow funds in order to purchase goods and services right away. You pay the money back later, often with interest. But credit can be a reference to plenty of related ideas. 

You could also talk about:

• The different types of credit accounts
• The differences between credit cards and debit cards
• Credit reports and credit scores
• Some factors that impact credit scores: payment history, credit utilization, new credit applications and hard credit checks, credit mix 
• How credit scores are based on credit history
• Whether your teen has a starting credit score

Credit can seem like an abstract concept for teens. You might make it more relatable by connecting the importance of credit to how it could affect your teen’s goals. They might be interested to know that in some cases, cellphone providers may waive security deposits if they see good credit scores, for example. And landlords may check credit scores as part of rental applications. They can check their agreements to see if either situation applies to them.

You could also talk about: 

• The difference between good credit and bad credit
• What a good credit score is
• What creditworthiness is
• The benefits of having a good credit score, including how it helps with getting a credit card and qualifying for a car loan
• How to budget, use credit responsibly and keep personal information private and secure

Be sure your teen is starting with a clean slate by checking their credit reports. Even if your teen can’t get credit on their own, there are still ways they could already have a credit report, including by error or because of identity theft. And that could lead to headaches once it’s time to open an account.

You can contact the three nationwide credit bureaus—Equifax®, Experian® and TransUnion®—to check your child’s credit and dispute any errors. And, according to Experian, they can check themselves once they turn 14. 

When your teen is 18, you can introduce them to CreditWise from Capital One, where they can check their TransUnion® credit report and VantageScore® 3.0 credit score. It’s free, and using it won’t hurt their credit scores.

You may be able to help your teen build their credit before they’re 18 by adding them as an authorized user on your credit cards. That’s if the card issuer reports information to the credit bureaus and the credit bureaus include that information on credit reports. If information doesn’t appear in a credit report, it may not affect an authorized user’s credit or credit score at all.

Responsible use could help your teen establish and build their credit history and contribute positively to yours. Negative actions, like missed payments or high credit utilization, could hurt both of you. 

When you add a teen as an authorized user on your Capital One card, you can track their spending and receive real-time alerts with the Capital One Mobile app.*

If you think your teen is ready to use credit, there are some options you can both consider. Kids typically have to be at least 18 years old to open a credit card in their own name. But if they’re under 21, they’ll also have to prove they can independently make the minimum payments on the account. 

Many teens start with credit-building cards like a student credit card or secured credit card.

Loans can give teens a chance to show they can handle making consistent, on-time payments, which could help them build credit. But keep in mind that if your teen makes a late payment or misses a payment altogether, it could also hurt their credit scores.

If your teen needs to take out student loans for college, they could be helpful in establishing and building credit history. That’s because the amount that’s borrowed for student loans, as well as the repayment history, shows up on credit reports. 

Learn more about ways to pay for college.

According to the Consumer Financial Protection Bureau, a credit-builder loan may be “especially beneficial” to those “without a credit score or those with no existing debt.” If your teen qualifies for one, the loan provider will deposit the amount of the loan into a savings account. Your teen will be expected to make monthly payments on the principal, plus interest. Once the loan is paid off, the funds are released.

Teens can learn a lot from watching how you manage your finances and credit. You might want to make a point of sharing why you’re considering using one credit card over another. Or show your teen what a credit card bill looks like and how the payment impacts your household’s finances. 

You can also share stories of mistakes you or your friends made during your teens and what you learned. It might not stop them from making their own mistakes. But hopefully, they won’t repeat the same ones, and it might help them feel comfortable coming to you for advice. 

Building and establishing credit for your teen is just the start. Maintaining good credit requires responsible management of credit cards and other financial accounts. It can take time, and it’s an ongoing process. But learning early might help them reach so many future milestones.

For next steps, you could learn more about adding your teen as an authorized user or student credit cards from Capital One.