How to Help Your Teenager Begin to Build Credit Responsibly

Your little one is all grown up! He might be heading off to college in the fall, or she might start working full time after high school graduation. In either case, your job as a parent isn’t quite done.

You also need to make sure they are on the path to building good credit.

The good news is that you no longer have to worry about credit card companies persuading your teenager to sign up for a credit card he might not be ready for in exchange for a Frisbee, a tee-shirt, or a slice of pizza.

Since the Credit CARD act of 2009 went into effect, young adults are no longer thrown into the credit deep end and left to sink or swim on their own. Anyone under the age of 21 who is applying for credit must now either have an adult co-signer or proof of income in order to qualify for credit.

The flip side of this good news is that parents have to step up and make certain that they teach their teenagers how to build good credit. Considering the fact that the average household carrying credit card debt owes over $15,000, helping underage adults to make good credit decisions is not necessarily an easy task.

If you want to make sure your teen gets a good start financially, here are five moves you can help her take to start building credit:

1. Make sure your teen’s credit is his own.

Identity theft of minors is a serious problem, affecting tens of thousands of children and teens each year. Since teens have a clean slate credit-wise, they make an attractive target for identity thieves.

Parents can request their minor child’s credit report from the three bureaus, and it’s a good idea to do this, particularly if you have reason to believe your teenager’s identity has been stolen. You can check this for free at You can also check your teen’s credit score for free using a service like

In any case, it’s difficult for your teen to build a good credit history if there is fraudulent activity under her name, so it’s worthwhile to request a credit report just to ensure that every credit decision she makes is her own.

2. Make your teenager an authorized user on your credit card.

If you have good credit, allowing your teenager to become an authorized user on your account will allow them to “piggyback” on your credit while making it impossible for them to overspend without your knowledge. In addition, you have the ability to limit the available credit for any authorized users, so this can be a great way for your teenager to put a toe into the water of responsible credit use.

The only downside to this strategy is the fact that the bill will still come to you. So while your teenager will benefit from your good credit, and will learn not to use plastic for every transaction (at least, not without having to face the wrath of Mom and Dad), being an authorized user will not give her a real sense of the responsibility facing her.

That fact may be enough to tempt parents into co-signing a credit card for their teen—but, except in very specific circumstances, parents simply should not do that. Co-signing for a loan will enable your teen to make poor decisions while you will still be on the hook for the consequences. There are better ways to teach your teenager how to pay her bills—ways that can’t potentially hurt your credit. For instance:

3. Have your teenager pay for his own utilities.

While on-time payments for utilities are generally not reported to the credit bureaus, delinquencies often can be. According to Investopedia:

“[Utility companies] will report delinquent accounts much more quickly than other institutions.”

Paying for utilities may not directly help your teen build good credit, but it will give him an opportunity to learn good budgeting and bill paying habits while the stakes are still relatively low.

For example, when I was living in the dorm my freshman year in college, my parents elected to have my phone bill (which also happened to be my only utility bill) sent directly to me. They also made it clear that they would not bail me out if I had a particularly high bill. (This might have been a bluff on their part, but it was enough of a threat to keep me sweating through some lean months). This helped me to learn very early how to budget, how to schedule my bill-paying, and the painful repercussions of making a late payment. That meant I was ready for the responsibility of a credit card when I applied for one two years later.

4. Encourage your teenager to get a job and apply for his own credit card.

The issue of a job can be a pretty good litmus test for your teen’s readiness for responsibility. Ideally, Junior will want to work and either contribute to his own education expenses or earn his own money. If he balks at the suggestion of (gasp!) working, he’s clearly not ready for credit and it’s time for you to start showing some tough love.

But if your teenager is earning his own income, he can apply for credit on his own even if he is under 21. But he will still need some guidance from you. Make sure that he only takes on as much credit card as he can handle. Both retail credit cards (which can be easier to get with no credit history) and secured credit cards can limit the amount of trouble your teenager can get into while giving him an easy introduction to credit. An alternative to consider is (read our review).

If your income-earning teenager is ready to apply for his own credit card, be sure to help him find the one that will best fit his needs.

Related: 38 Summer Jobs For Teens And College Students

5. Have your home address remain her main residence.

This is particularly helpful for college students. Lenders like to see stability in terms of living arrangements, and college students will often change their address at least once a year. Your child can still use your address on credit card applications, which will appear much more favorable on her applications than four different residences in four years would.

However, if you do allow your teenager to do this, make sure that they are signing up for paperless bills or statements, so that they cannot claim they didn’t receive bills in time to pay them.

The Bottom Line

The Credit CARD Act was created to help protect young adults from predatory lending practices and from stumbling into huge credit problems through ignorance. As much as I believe in the importance of this legislation, it only takes care of one side of the equation. Parents have the responsibility to teach their children how to handle credit, and young adults must take the time to learn the ropes before mistakes become disasters.

Even parents who have struggled with credit themselves can help their teenagers to get a good start with credit, as long as they set reasonable boundaries and limits, and take the time to educate themselves and their kids.

How did you first establish credit? Did your parents help you to learn responsible borrowing?

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About Emily Guy Birken

Emily Guy Birken is a former English teacher and respected personal finance blogger. She lives in Milwaukee, Wisconsin with her engineer husband and two high-energy little boys. She has written four books: The Five Years Before You Retire, Choose Your Retirement, Making Social Security Work For You, and End Financial Stress Now. Emily's thoughts on parenting and life in general are found at The SAHMnambulist.


  1. CommonCentsWealth says

    I don’t have any kids yet, but my parents used many of these tips when helping me build credit.  They had me open a credit card with a very small limit when I got my first job at 16 so that I could start building creidt.  Their suggestions worked really well because I now have a great credit score and a lot of it comes from their suggestions when I was a teenager.