No kids allowed

Why adding a child as an authorized user might not help their credit

Having a strong credit profile can determine whether your kid gets approved for a loan or how much they’ll pay for car insurance when they’re grown. But establishing credit for someone with no credit history is challenging.

A common workaround is for parents to add their children as authorized users on their credit card accounts. Credit checks aren’t required, and the user can quickly piggyback on the primary cardholder’s credit history. But this arrangement isn’t always the right move. Here’s what to know about the potential limitations of adding your kid as an authorized user and alternative ways they can build credit.

1 They might be too young to reap the benefits If you’re hoping to boost your child’s credit before they even learn to tell time, you could face roadblocks. For one, your kid may not qualify for authorized user status. While some card issuers don’t have age restrictions, others require a minimum age of 13 or older.

Even if you can add your child, the issuer may not report their account details to the credit bureaus. Some issuers allow kids as young as 13 to become authorized users but only report credit information for those age 18 and older.

2 Misuse can lead to damaged credit Being an authorized user doesn’t guarantee improved credit. “Same as the primary account holder, it can affect your credit positively or negatively, depending on how the card is used,” says Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling.

If you have a record of on-time payments and don’t use too much available credit, that can generate or help your kid’s credit score. But your credit and your child’s can suffer if either person uses the account unfavorably.

Ultimately, it’s up to the parent to keep the account in good standing.

3 Authorized user status might not be enough for future lenders Some lenders don’t take authorized user accounts into consideration when reviewing credit applications or give them much weight.

Having an account in their own name puts your kid in a stronger position because it shows they’re equipped to manage payments. You can guide them toward opportunities in adulthood.

Co-signing your kid’s car or student loan can also help build their credit as they make on-time payments, but as with authorized user relationships, make sure you understand the risks.

This article was provided to The Associated Press by the personal finance website NerdWallet. Want to suggest a personal finance topic that Quick Fix can address? Email apmoney@ap.org