Does My Parents' Credit Affect Me?

You may not realize it, but your parents may have damaged -- or helped -- your credit rating. How your parents handle credit does not automatically pass on to you, but many parents attach their children's names to parental accounts that affect your credit rating. If you want to build credit on your own, you can probably acquire accounts by yourself.

Identification

The credit bureaus never merge credit reports. Your parents' credit can only affect you when they add your name to an account. Becoming an authorized or joint holder builds your credit rating when your parents pay bills on time, or damages your credit rating when they miss payments. Thus, much of your credit rating is in your parents hands when they list you on an account. Any debt on a co-signed or authorized account counts against your month debt to income ratio, which has just as much importance as a credit rating. If your parents declare bankruptcy, you probably become solely liable for any co-signed debt.

Credit Card Reform

In some cases, you must rely on your parents' credit history. Congress required anyone under 21 to have a parent co-sign on an account or have some verifiable source of income to acquire credit. Unless you hold a job and earn at least a few thousand dollars in income, you may need your parents to help you build credit.

Considerations

Lenders do not always use the details listed on a credit report when they see joint or authorized accounts. For example, you can have a credit history older than you are when your parents add you to an account they opened before you were born. In this case, the lender probably would give you a shorter credit history, which counts for 15 percent of your credit score, according to Jeanine Skowronski of Main Street.

Tip

You should have some income, such as a part-time job, so a lender can verify that you can afford a line of credit. Unless your parents have helped you build credit, you may need to look at entry-level credit cards. Secured credit cards -- credit card backed by a security deposit -- and retail accounts are a common first credit card because of their low limits and lax approval requirements. If you feel comfortable attaching your name to your parents' account, consider becoming an authorized user so you have no legal liability to pay the bill.