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rated:
Long time lurker here. I have been thinking about making my kids authorized users of my credit cards so that they can enjoy longer credit history as soon as they are on their own. Creditors are now required to report the account for primary users as well as secondary/authorized users. Here are what I can think of:
Pros: Longer credit history, better down the road.
Cons: If kids turn out to be irresponsible, I would be digging a deeper hole for them as they would have access to bigger credit lines etc.

What do you think?

PS: This probably has been discussed at length but not recently according to my search.
 

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There are other ways a good credit can help them. For an auto loan, it could make a difference of a few % APR on loan. B... (more)

Shandril (Nov. 15, 2016 @ 10:12a) |

Good topic...i have always considered doing this, my kid is 2...just open up the card and put it in a drawer.

Luniz97 (Nov. 15, 2016 @ 1:27p) |

True for most cards, but not true for Amex cards now.

stanolshefski (Nov. 16, 2016 @ 12:40p) |

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rated:
My dad made me an AU on his cards and I enjoyed fantastic credit (used responsibly, natch) because of it.

I have done the same for my kids, mostly for the novelty of them having their own cards since they are still many years away from needing it.

You don't have to do this while they are children, though, since the entire history of the account gets reported even if you've just added them. You can wait to see if they show responsibility before making the decision.

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It used to be you could add kids to CCs when they're born.
Nowadays, a lot of banks require AUs to be 16 (I think) so they're getting an advantage, but not much of one.

There's little difference between getting them their own cards as soon as possible and adding them as AUs to your oldest card when it's time.

I'm 36, my longest active card is 50 years 7 months - which is my dads citicard he put me on as AU when I was 34. It's impact is not reliant on when he added me as an AU.

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imbatman said:   
I'm 36, my longest active card is 50 years 7 months - which is my dads citicard he put me on as AU when I was 34. 

  ??

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Giving a child a 'good' credit score straight out of the gate is not going to help them any. This means they can dig a hole deep and fast (especially if they discover the power of that high credit score).

I don't see the benefits of having your child have a longer history. MAYBE if they are tettering on the edge of a home loan and the longer history cinches it, but then I'm worried that they can't afford to pay that loan since they were on the edge.

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rufflesinc said:   
imbatman said:   
I'm 36, my longest active card is 50 years 7 months - which is my dads citicard he put me on as AU when I was 34. 

  ??

   I would assume, that the account got back dated to when his father opened it.  A lot like AMEX would do when you added an AU up to a few years ago.  In 2010 I added my wife as AU after we got married, almost over night I got her credit score up 75 points.

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ahcool said:   Creditors are now required to report the account for primary users as well as secondary/authorized users.
 

  No, they are not.  They are required to report AUs that are the spouse of the primary cardholder.  Most just report all AUs to ensure they do not inadvertently run afoul of the law.  And for that matter, card issuers arent required to report anything at all, they just cannot discriminate between the primary accountholder and their AU spouse.

You first need to do something to create a credit bureau file for your kid.  Otherwise there's nothing for the AU account to be matched with.  A credit card that requires the SSN for AUs may take care of that for you.

If the credit card issues a completely different account number for an AU, they may only report the account history from the time the card is issued.  If the AU card is a carbon copy of the primary card (except the name on the card, of course), they'll report the entire account age/history regardless of when the AU was actually added.

rated:
daw4888 said:   
rufflesinc said:   
imbatman said:   
I'm 36, my longest active card is 50 years 7 months - which is my dads citicard he put me on as AU when I was 34. 

  ??

   I would assume, that the account got back dated to when his father opened it.  A lot like AMEX would do when you added an AU up to a few years ago.  In 2010 I added my wife as AU after we got married, almost over night I got her credit score up 75 points.
 

  Your assumption is correct. My dad opened a gas credit card in earlier 1966. It's been through around 2 dozen banks since then, now at Citi.
the point is my credit assumed the benefits of that card opened in 1966 the day my dad made me an AU on it.
 

rated:
You know your kids. If they are responsible, then give them an authorized account. Otherwise, give them gift cards or options that you can refill if necessary.

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If they're budding FWF'ers, then yes. If they're just going to get in trouble with having the credit history/score of a responsible 40 year old when they're 20, then pass. Their income will end up being the overriding factor on lending anyway.

How they do with your actual AU card is a different issue. You can mitigate with limits though. Maybe even zero if you're just doing ti to establish history.

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I believe AmEx business cards you can specify spending limits for auth users.

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You have the choice of adding them and not giving them the card. Amex personal accounts provide individual cards and account numbers. You can set an individual limit on each AU card. You know which kid did what. Do that if you like. YOU are on the hook for their spending.

I started the kids on PayPal student cards which I can limit the risk/liability to money advanced only. If the kids call to ask for more funds, I can put more funds on the PayPal student cards in a matter of minutes. IMO it has worked out better.

rated:
I'd start them out with PP Debit Cards like Amex Bluebird. Throw as much as you're comfortable losing on the balances $100 to $300 maybe. Have the PW to the online account to see the activity.

After 6-12mo I'd move them up to a Capital One Secured MasterCard. This card builds & rebuilds credit histories. Again also have access to the online accounts.

Same thing after 6-12mo I'd move them up to AU on your CC.

 

rated:
I would say that this might be workable if you're financially stable, and the odds of your finances going sideways are next to zero.

Case in point, my FIL added my wife as an AU when she was very young. Flash foward 15yrs later, and her credit looks like a war zone due to his late pays and write-offs. We had to write many letters credit bureaus stating something to the effect of "this isn't my card or credit history" in order to jump through the hoops for getting a mortgage.

For every positive thing that might come from your idea, there are some potential negatives. It's up to you to see if they might ever apply.

Good luck..

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Dealpouncer said:   I believe AmEx business cards you can specify spending limits for auth users.
  they also don't report to CRAs, defeating the purpose of adding an AU to help their credit.

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imbatman said:   
I'm 36, my longest active card is 50 years 7 months - which is my dads citicard he put me on as AU when I was 34. It's impact is not reliant on when he added me as an AU.

  

I tried that with an 18 y-o in 2011, turned out Amex didn't backdate AUs any more, probably would have worked when she was 16.
In 2015, she signed up for CreditKarma, and excitedly showed me her 765 FAKO. I wonder what her score is now, with that Amex AU card still the only tradeline, but closed a year ago when I refused to participate in a Financial Review?

EDIT: I didn't hand her a $30k Blue card, or even tell her she was an AU on the account.

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JW10 said:   You have the choice of adding them and not giving them the card.
 

  
I don't think OP is concerned with the kids spending his money, he is concerned about the kids using their artificially excellent credit to open up huge lines of their own.

rated:
if you give your kid a leg up with good credit and they blow it and end up in debt, it's not much different than them building up a little bit of credit then blowing it up and ending in debt.
They blew it either way, and bankruptcy may be the solution either way.

Given that consideration, I'd tend towards giving my kid a leg up.

rated:
If you give the kid a leg up on his credit history, he can probably buy that first new car without you having to co-sign for it.

If he blows it, at least you can watch from a distance that way, instead of being personally involved, like the relative who co-signed my brother's car when he was 18, which worked out OK until it died and he quit making payments. The balance was more than the repo value of a non-running Vega, so the relative got hit for about $900, or 7 ounces of gold, plus had a repo on her credit report when she bought a house a year later.

 

rated:
forbin4040 said:   Giving a child a 'good' credit score straight out of the gate is not going to help them any. This means they can dig a hole deep and fast (especially if they discover the power of that high credit score).

I don't see the benefits of having your child have a longer history. MAYBE if they are tettering on the edge of a home loan and the longer history cinches it, but then I'm worried that they can't afford to pay that loan since they were on the edge.

There are other ways a good credit can help them. For an auto loan, it could make a difference of a few % APR on loan. But a lot of companies are now using credit score as predictor for risk. Almost all auto insurers do. Same if kids need renters insurance. Should they make the mistake of carrying a balance on credit cards, they'd also pay less interest with a good credit than with subprime one.

There are some downside risks of course to under-represent their risk as borrowers by artificially giving them a better credit history than they deserve. So I think the decision hinges on knowing your kids. How financially literate are they? What kind of shoppers are they? Savers vs. Spenders. Etc.

I'd second the idea of baby steps and education. Start the kids on small secured credit cards to give them the hang of it if unsure. You gotta start somewhere. Emphasize education and understanding of how the whole system works on financial devices they can only moderately screw up with (secured lines of credit). Once, they're comfortable with that, you could then add them as AUs when they need it for insurance or loans.

rated:
Good topic...i have always considered doing this, my kid is 2...just open up the card and put it in a drawer.

rated:
doveroftke said:   My dad made me an AU on his cards and I enjoyed fantastic credit (used responsibly, natch) because of it.

I have done the same for my kids, mostly for the novelty of them having their own cards since they are still many years away from needing it.

You don't have to do this while they are children, though, since the entire history of the account gets reported even if you've just added them. You can wait to see if they show responsibility before making the decision.

  True for most cards, but not true for Amex cards now.

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