Will adding my son to my credit card help his credit score?

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The Credible Money Coach helps a reader understand how being an authorized user can affect credit. (Credible)

Dear Credible Money Coach,

I have a very good credit score and an average debt-to-income ratio. I want to help my son and daughter with their credit scores. They are both young and have little to no credit. My son, however, defaulted on a lease and was sent to collections. That debt has now been paid off, but his credit score is very low. With my good credit and on-time payment history, if I add him as an authorized user on a credit card and then slowly pay it off over six months, will this help his credit score come up? Conversely, will his bad credit score lower mine? Is this something you would suggest or avoid? — Dania

Hi Dania, and thanks for your question. Yes — adding your son to your credit card as an authorized user could help improve his credit score. But there are caveats to keep in mind.

The biggest one is, if both of you use the credit card and aren’t clear on who will pay the monthly bill, you could end up with more debt than you bargained for. And if that debt makes it difficult to pay your bills, both your son’s and your credit scores could be negatively affected.

How being an authorized user can boost credit

Generally, anyone can become an authorized user on someone else’s credit card. Some credit card companies set minimum age requirements for authorized users, but they usually won’t check the authorized user’s credit. 

If you add your son as an authorized user, the card issuer will send him his own card that draws against your account. He’ll have access to the card’s full credit limit, unless the card issuer allows you to set limits for him — some do.

As long as you continue to pay the bill on time and keep your debt-to-income ratio low, that positive history could help improve your son’s credit score. Here’s how:

  • A new credit account will appear on his credit report, and it will show your past positive history on the account.
  • If you’ve had the card for a number of years, it will improve the length of credit history on your son’s account — one of multiple factors that determine credit scores.
  • When the card issuer reports payment activity on the card to the credit bureaus, the information will show up on both your and your son’s credit reports.

While the card issuer won’t track who’s responsible for the spending on the card, it’s a good idea for you and your son to agree on how he’ll use the card and pay for the purchases he makes with it.

Potential negatives of authorized users

Simply adding your son to your credit card as an authorized user won’t negatively affect your credit. Your credit scores are still separate, and his actions before becoming an authorized user can’t harm your credit score.

But his actions after becoming an authorized user on your card can affect your credit in several ways:

  • If he makes charges that push your balance toward your credit limit, your debt-to-income ratio will suffer.
  • If you agree that he’ll pay for charges he makes and he fails to do so, your payment history will be affected.
  • As the cardholder, you’re ultimately responsible for making payments. If you fail to pay on time each month, your credit and his could be negatively affected.

Some credit-building alternatives

Kudos to you, Dania, and to your son, for taking steps to improve his credit. Being an authorized user on someone’s credit card is a big responsibility, and it’s not for everyone.

If you decide together that this isn’t the route you want to take, here are a few other ways your son can build his credit:

  • Apply for a secured credit card. With this type of credit card, your son would make an initial deposit with the card issuer as collateral. That amount would be his credit limit, and when he uses the card he’ll be drawing against that balance. As long as he makes payments on time — and assuming the card issuer reports payment history to the credit bureaus — this can be a safer way to build credit.
  • Seek a credit-builder loan. These loans are usually for small amounts of $1,000 or less. If your son is approved for a credit-builder loan, the lender will deposit the loan funds into a locked account. Your son will then make payments on the loan, which will include interest and probably fees, over the course of the loan term — usually six to 24 months. The lender reports these payments to the credit bureaus. At the end of the payment period, the lender will release the funds, possibly with interest, to your son for use. People who have no existing credit and who use credit-builder loans can improve their chances of having a credit score by 24%, a Consumer Financial Protection Bureau report found.
  • Get credit for making non-credit payments. Some credit-reporting agencies will accept information on payments for utilities, rent, and cellphone bills and incorporate that positive history into your credit score.

Dania, the most important thing you can do to help your son build his credit score is to continue modeling good credit behaviors, including paying all your bills on time and keeping your debt-to-income ratio low.

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About the author: Dan Roccato is a clinical professor of finance at University of San Diego School of Business, Credible Money Coach personal finance expert, a published author, and entrepreneur. He held leadership roles with Merrill Lynch and Morgan Stanley. He’s a noted expert in personal finance, global securities services and corporate stock options. You can find him on LinkedIn.