Credit Cards to Build My Son's Credit

Authorized User

Before your son even turns 18, which is the age at which he can enter a legal contract, you can add him as an authorized user on one of your credit cards. He will receive a card with your credit card number but his name. All charges he makes on this card will appear on your account statement and you will still be fully responsible for paying the bill. However, in most cases, the account history will all appear on his credit report for as long as he remains an authorized user on the account. This technique allows him to benefit from your good credit management and practice using a credit card.

After your son is 18 years old but before he turns 21, the CARD Act requires him to have either a co-signer or proof of income to be able to get a credit card. Many banks offer student credit cards that allow young adults in this age bracket to apply with a co-signer. When you co-sign with your son, the account is held jointly and appears on both of your credit reports. Although the bills will be sent to him, you are also held legally responsible for repayment. In addition, the credit card company needs your approval before increasing his credit line. If your son has a job or savings account, he might be able to get a student credit card without having you co-sign.

Secured credit cards are relatively easy to obtain because lenders require a deposit, and therefore do not require that the borrower have much, if any, credit history. If your son has at least $300 to $500 in cash, depending on the lender, he can apply for a secured credit card and use that money as the deposit. His credit line will be equal to the amount of his deposit and the card will be in his name only. This will help him develop responsibility without putting your credit on the line.

Regardless of the type of credit card your son chooses to obtain, he should focus on a few major areas so the credit card will help his credit, not hurt it. First, he should pay the credit card bill on time every month to develop a consistent payment history. Second, he should keep the balance on the credit card well below the credit limit to maintain a low credit utilization ratio. Third, he should focus on maintaining a few accounts for a long time, rather than opening and closing many different accounts. Having longevity on cards and applying for credit infrequently both help his credit score.