Parents get a head start on establishing kids’ credit ratings
(CBS, KYMA/KECY) - Parents are getting a head start on establishing their children's credit rating, and this is what parents should need to know.
Shannon Ho may be playing "pretend" with her daughters, two-year-old Aria and one-year-old Gemma, but the lessons this mom is teaching are real.
"[Gemma] likes to buy Cheerios with her credit card. Cheerios and what else? Water bottles! Fiji water bottles," Ho shared.
Also real are the credit cards. As babies, Aria and Gemma have two cards each.
"I figured why not? My parents had did it for me when I was a kid. So, I did the same for my girls," Ho expressed.
She and husband Jeremy added both daughters as authorized users on their existing card accounts.
"My one-year-old has no idea what's going on. My two-year-old, however, I do take her to Target every week to buy her cheese crackers and her snacks. And she picks two items...any two and she gets to pay. She taps and pays," Ho remarked.
With each tap, Aria is building a credit history, which will help determine her future credit score.
"There's really no 'too early.' The earlier the better, right?" said Winnie Sun, a financial advisor.
Sun says many banks, including Capital One, Bank of America and Chase, allow kids to be authorized card users as long as they have a Social Security number.
When asked why it is important to have a good credit score, Sun said, "This is sort of your financial GPA. If you have a good one, that enables you better rates on your mortgage, better rates on your car loan. Maybe that apartment you're looking to rent is going to be advantageous to have something more attractive. And most importantly, a lot of employers are actually looking for a high credit score in order to give you that next job too."
Ho says with every tap the kids are securing their financial futures and learning the value of a dollar.
"It's a habit we build from a young age to spend only what you are given or what you can afford and nothing more," Ho explained.
If you decide to get an early start, pay your bill in full, on time, every month to avoid passing down a negative credit score, and monitor your bills to ensure there are no unauthorized purchases.
