Do Credit Cards Work in Building Up a Credit History for Kids?

A child might have better credit than an adult with a job and several credit cards. Although children normally cannot get credit, if a child does acquire a line of credit, the credit bureaus put payment history on the minor's profile. Parents might want to get a credit card for a kid, because building credit early reaps benefits for the child later in life.

Identification

Credit cards help build credit history for a kid, according to Maxine Sweet of Experian. This typically occurs when a parent adds the kid as a cosigner on a credit card or authorized user. In both scenarios, the lender reports good payment history on the parent's and kid's credit file with the national credit bureaus.

Getting Credit Score for a Kid

Obtaining a credit score for minor requires more effort than for an adult: The Annual Credit Report website does not accept requests for people under the age of 18, according to The Consumerist. Thus, the parent must order the report by writing the credit agencies or phoning in a request. The major bureaus only release a minor's report to a parent or legal guardian to prevent children from opening fraudulent accounts.

Benefits

Kids who build their credit at a young age have a headstart on everyone else when it comes to obtaining credit on their own in the future. When the child graduates college, for instance, he may have a high enough score to qualify for a mortgage at a low rate. This could reverberate throughout the rest of his life. Raising a score by 30 points, for example, saves about $105 on finance charges, according to the Consumer Federation of America. Thus, understanding credit early could save the child thousands over his lifetime.

Disadvantage

The 2009 Credit Card Act makes it difficult for a person under 21 to acquire her own credit card unless she has a job that can support the credit limit. Since parents probably have to give their kids a credit card to build credit for the minor, you risk the child maxing out the credit limit and damaging both of your scores. If you decide to help your child build credit, clearly spell out to the child how much or when she can use the account.