- What ways can I help my child to build their credit now?
This edit is more details for those seriously curious why I am doing this (there have been a couple more notes on the question). It is quite long, so skip over this if you are not looking to give me a comment/answer about how I am ruining my daughter by trying to help her... this is just an FYI to why I want to give my daughter a boost. Answering the question with why this is a bad idea is not beneficial to me...While your thoughts may be different, this is the thought process for my actions and why I will do whatever I can to give my daughter a head start:
My parents taught me financial responsibility at a very young age. There was a product available when I was growing up called ParentBanc (I think it was called) that they used. It was a checkbook with real checks. When I wanted to buy something I did not have the cash for in store I wrote a check to "the bank" in the store and my parents would accept the check and give me money or pay for it. I would notate in the registrar my check number and amount and all that to track my account balance. I would have to balance my checkbook every month, order new checks, etc.
If we wanted something we could not afford at all we would have to type up a letter requesting a loan (amount, what we wanted, when it would be paid back, etc.) and sometimes it would come back denied. The entire process of checks and loans and everything was all extremely annoying of course!
Beyond that I also had a program in ROTC called NEFE (I can not remember what NEFE was an acronym for) that also taught financial responsibility. This went even more in depth explaining retirement accounts, credit scores, balanced budgets (envelope system and all that), and many other things. I enjoyed that program so much I still have the work book at home to teach to my daughter when she gets older.
So... from all this I was more than prepared for my financial future. Yet... when I tried to get my first loan from the bank I was denied. Because I did not have a credit score I was deemed not fiscally responsible, but by any account (other than the credit companies) I had been fiscally responsible for years.
Not only was this a pain (and unnecessary), but even worse was the interest rates I tended to see. Whether you are good with credit or bad with credit a higher rate still costs you money. I don't care if you are great with money or not; that higher rate is costing you money. Even if my daughter is going to be absolutely terrible with her finances in the future I want to help her save money so that once she learns her lesson she can climb out of that debt trap faster.
As annoying as all that ParentBanc stuff was that my parents did with me I am of course grateful for it because I know how to budget my finances and prepare for everything that can be thrown at me financially.
When my daughter gets older I will do everything for her that my parents have done for me. I will prepare her to the best of my ability. If my daughter has better credit and messes up it will not affect her as badly. Just because she stumbles does not mean that she should suffer for the next six to ten years... Whereas if she is great with her finances she will start this race of financial status further along then your children will. Lower interest rates, higher credit score, and most importantly more money in the bank...
If you do not agree with providing your children with the best possible leg up in life that you can, that is fine. Personally I would like to see my child start the race a little ahead and hope that helps to either propel her forward a little bit faster or at the very least make her life a little bit easier with less to stress over. I would like her life to be easier than mine was. I would like to help her avoid the complications and pitfalls that I had to deal with.
Again, if you do not agree or understand why I am doing that that is fine, but your answers about how I am ruining my daughter or whatever are really not helpful.
I would just like to mention a few things for anyone else that reads this; things I assumed were kind of understood...
I will take the time to teach her financial management skills. It would be pointless to give her a boost of credit if I planned to throw her out without any money management skills and leave her to learn it all for herself. However, I do appreciate the comments ensuring I did know that before hand.
There is a difference between having credit and using credit. I am not letting my five year old go crazy in Toys"R"Us with a credit card here. If my daughter chooses to get a new card or do anything else in the future that needs credit she will be better off because of the time I have taken to help her. If she never does it will not hurt her...
For those individuals that have no credit history by choice or think that I am "unloving" to my daughter by giving her a boost with her credit as soon as possible - Your comments do not apply to my situation. Thank you for taking the time to post, but: I love my daughter, I know the struggles I dealt with growing up without credit, I am not (a do not foresee becoming) rich enough to survive without credit, and as I mentioned previously she can use the boost I have given her or choose not to when she grows older.
@mhoran_psprep Thank you for your comment about ensuring I keep an eye on her credit reports to keep them accurate. I will add that to my own yearly check!
Back in the day there were all those horror stories of parents opening cards in their kids' names and ruining their credit, but I would like to start building my kid's credit now or ASAP to help her. Everything I have tried to do (open her an account / add her as an co user / etc) they have needed a signature from her and she is four...
Are there other options available that I have not thought of yet? Has anyone else tried something similar? I do own a small business... could I potentially do something with that?