As your child becomes an adult, a good credit score and an established credit history are crucial for financial independence. A good credit score can help your children get approved for loans, rent a place to live, and even get jobs once they turn 18. At this age, they will also be eligible for various forms of credit, such as credit cards, overdrafts, student loans and 'buy now pay later' (BNPL) options.
The question is, at what age can you start building up a credit history for your child, and how do you do it?
At what age do you have a credit score?
Typically, only people over the age of 18 have a credit score. However, kids can have a credit report if:
They are a victim of identity theft. If a kid's identity is stolen and used to open a credit account, they will be listed as the account holder on their credit report. You will need to contact the credit bureaus like Experian, Equifax and TransUnion directly to see if this is the case.
Helping your child understand how to build a credit history
A credit history is a record of your past borrowing and repayment behaviour. Lenders use it to assess your creditworthiness or how likely you are to repay a loan. While you can't build your child's credit history before they are 18, you can teach them about financial literacy and what it means to borrow money so they understand the implications as an adult.
Get accepted for finance.
Rent or take out a mortgage.
Get cheaper interest rates on credit.
What to teach kids before building their credit history
If you want to prepare your child to help them build up a good credit history, there are a few things you need to teach them before they turn 18.
Good saving habits
What credit is
How credit cards work
Needs versus wants
The importance of tracking finances
What credit reports are
Why a good credit score is important
Saving and borrowing
Your child should have a good level of financial literacy by the time they reach the age of 18.
Teaching them good savings habits may limit their reliance on credit in the future. It also teaches them to have a healthier relationship with money. Giving them credit lessons may also help as it introduces your child to how borrowing works and what they should avoid.
If you teach your children about credit and money management, they will understand how to build their credit history.
Does adding your child to your credit card help them to build up a good credit score
Some people believe that adding a child to their credit card can help them to build up a good credit score from the age of 13. Unfortunately, this isn't true.
While adding your child as an authorised user on your credit card can offer some benefits, it won't help them develop a credit history. This is because the primary cardholder is the one responsible for making repayments.
Ways to help my child understand how to build a good credit history
If you want to help your children eventually build a good credit history when they are 18, here's what you can do:
Get them used to handling money with a prepaid debit card
One of the main ways to build up a credit history is to apply for and use a credit card. As the repayments are made, it shows you can be trusted to have and manage credit. Doing this builds up both credit history and credit score. Credit cards are only available once your child has turned 18.
To ensure your child doesn't get swept up in the excitement of having a line of credit when they turn 18, get them used to financial independence early. One way to do this is to give them kids' debit cards. By giving them a prepaid card, like the GoHenry card, they will gain experience with budgeting and using a card. So when they can apply for a credit card, they will have a good idea of how to manage it.
Related: Does a debit card help build credit?
Teach them good credit habits
Another way to ensure your child builds up a good credit history is to teach them good credit habits. Make sure they know the dangers of not making repayments on time and only spending or borrowing what they can afford to pay back. If you can teach your child good credit habits now, it sets them up to use credit responsibly by the time they turn 18.
Show them how to save
When kids learn how to save, they learn that they can't always have what they want right away and need to save up for it. This can help them avoid impulse purchases and make better financial decisions around loans and credit cards as adults.
Talk to them about peer pressure and advertising
Help your kids to see that they are constantly bombarded with advertising and marketing, as this can help them resist the temptation to spend money. At the same time, talk to them about handling peer pressure and how this can influence how much they borrow and spend in the future.
Get them registered on the electoral roll
Being registered on the electoral roll may help with your credit score. Some lenders will consider your electoral roll history when calculating your credit score. If you have been on the electoral roll for a long time and have never missed a vote, this will show lenders that you are reliable and will likely pay your bills on time. You must be 16 or over (or 14 or over in Scotland and Wales) to register.
Explain what borrowing, credit cards and debt are in an age-appropriate way
Borrowing means getting money from someone else. When you borrow money, you must pay it back, usually with interest. Interest is extra money you must pay on top of the borrowed amount.
Credit cards are a type of borrowing. When you use a credit card, you borrow money from the company issuing the card. Again you have to pay back what you borrow, plus interest.
Debt is when you owe money. It can lead to stress and anxiety in your life and problems with your credit score. A low credit score can make it difficult to get approved for loans or other forms of credit in the future.
Start a lifetime of financial education with GoHenry
A GoHenry kids’ debit card can help cement the money lessons you teach your kids by showing them the benefits of pocket money, budgeting, saving and how to spend sensibly. The GoHenry app also features Money Missions, allowing kids to earn points while watching videos and taking interactive quizzes on topics including saving money and spending wisely. The app is designed to be used alongside our prepaid debit card.