What actions should I be taking to establish good credit scores for my children?
"When I was in high school, my mom got me a joint credit account with both of our names on it for exactly this reason. Well, that, and to have in case I found myself in some sort emergency, but it was mostly to build credit history. That account is still on my credit report (it's my oldest by a few years), and looking at the age of it, I was 17 at the time we opened it (and I think my younger sister got one around the same time).  In my case, I now have an ""excellent"" credit score and my weakest area is the age of my accounts, so having that old account definitely helps me. I don't think I've really taken advantage of it, and I'm not sure if I'd really be worse off if my mom hadn't done that, but it certainly hasn't hurt. And I plan on buying a house in the next year or so, so having anything to bump up the credit score seems like a good thing." Until they're old enough to be legally responsible for their own credit, the only thing you can really do is show them by example how to manage money and credit in your own finances.  Teach them budgeting, immerse them in understanding how credit and financing work, and teach them smart ways to make their money work for them. When they're teenagers, you could potentially approach small banks or credit unions about ways to perhaps co-sign loans for them and let them make payments to learn good habits for managing their responsibilities, but that's not always easy either.  It won't do anything for their credit, but having the responsibility of coming in to make payments might instill good habits and help their self-esteem at the same time. You have great intentions, but as has been pointed out here already, from a legal standpoint there's not much you can do.  All you can do is prepare them for the day when they are on their own and can enter into credit agreements.  Kids going to college get into real trouble with credit because cards are handed out like candy to them by the banks, so teaching them money management skills is invaluable and something you can do now. You really can't. Credit rating is determined by financial history, and until your kids are old enough to legally sign a contract they have essentially no financial history. Interesting out-of-the-box thought, but not workable. My son who is now 21 has never needed me to cosign on a loan for him and I did not need to establish any sort of credit rating for him to establish his own credit.  One thing I would suggest is ditch the bank and use a credit union. I have used one for many years and opened an account there for my son as soon as he got his first job. He was able to get a debit card to start which doesn't build credit score but establishes his account work the credit union. He was able to get his first credit card through the same credit union without falling work the bureaucratic BS that comes with dealing with a large bank. His interest rate may be a bit higher due to his lack of credit score initially but because we taught him about finance it isn't really relevant because he doesn't carry a balance. He has also been able to get a student loan without needing a cosigner so he can attend college.  The idea that one needs to have a credit score established before being an adult is a fallacy. Like my son, I started my credit on my own and have never needed a cosigner whether it was my first credit card at 17 (the credit union probably shouldn't have done that since i wasn't old enough to be legally bound), my first car at 18 or my first home at 22. For both my son and I, knowing how to use credit responsibly was far more valuable than having a credit score early. Before your children are 18 opening credit accounts with them as the primary account holder can be problematic because they aren't old enough to be legally liable for the debt. Using them as a cosigner is even more problematic for the same reason. Each financial institution will have their own rules and I certainly don't know them all.  For what you are proposing I would suggest a small line of credit with a credit union. Being small and locally controlled you will probably find that you have the best luck there.
"Any kind of credit contract such as a mobile phone contract (could be SIM only or with a handset) would also help increase your number of accounts and demonstrate a track record of responsible management and repayments. If you have a Pay As You Go phone at present consider a SIM only contract with the same network, and if your parents currently pay for your phone consider if it would be worth switching it into your own name. Also make sure that you are registered on the Electoral Role at your permanent address and have at least a minimum payment direct debit set up on your credit card (even though you state you intend to repay in full) to make sure you don't forget a payment as this will disproportionately affect your score when combined with young age and few other accounts. Lastly ensure that you have a decent amount of ""head room"" on your rolling credit accounts like credit cards and aren't using more than 80% of the credit available to you through your monthly spending, if necessary by asking for an increased limit from your company (and then not using it)." Good credit is calculated (by many lenders) by taking your FICO score which is calculated based upon what is in your credit report.  Building credit generally means building up your FICO score. Your FICO score is impacted my many factors, one small one of which is your utilization ratio of your installment loans like student loans.  This is the ratio of the current balance to your original balance.  To improve your score (slightly) you would want a lower ratio.  I would recommend paying your student loan down to 75% ratio as fast as you can and then you can go back to $50/month. A much better way to improve your FICO score is to have revolving credit.  Your student loans are not revolving, they are installment loans.  Therefore, you should open at least one credit card (assuming you currently have none) right away.  The longer you have had a credit card open, the better your FICO score gets.  Your revolving credit utilization ratio is way more important than your installment loan ratio.  Therefore, to maximize your FICO, try to never have more than 10% utilization on your revolving credit report to the credit bureaus each month.  Only the current month's ratio affects your score at any given moment.  You can ensure you don't go above 10% by paying your balance before the statement cuts each month to get it below 10% way before any payment would be due.  (You should always pay your remaining credit card statement balance in full each month by the due date after the statement cuts to avoid any interest charges.)  Note that there is a slight FICO advantage to having at least one major bank credit card instead of just only credit union credit cards.  Also, never let all your revolving credit report a zero balance in a month, you must always have at least $1 reporting to the credit bureaus on at least one of your open credit cards or your FICO score will take a big negative hit. If you cannot get a normal credit card, go to a credit union and find one that offers secured credit cards, or a bank that does.  A secured credit card is where you place a deposit with the bank that they hold and give you a credit limit to match your security.  Ideally it would be a card that graduates to unsecured after your demonstrate good history with them.  For example, the Navy Federal Credit Union secured card unsecures for many people.  I also believe the Wells Fargo Bank credit card (you can join if there is a family member who served or a roomate who did) also will unsecure.  The reason you want it to unsecure and not be forced to open a new account to get an unsecured account is that you want your average age and oldest age of open revolving credit accounts to be as high as possible as this is another impact on your FICO score. Credit unions that anyone can join include, Digital Federal Credit Union, the Pentagon Federal Credit Union (which offers a secured card that does not graduate), and The State Department Federal Credit Union (also offers secured card that I think does not graduate). One other method to boost your FICO score is to get added as an authorized user on one of your parent's credit cards that has been open a long time.  Not all lenders will report such an authorized user, however, ones that are known to do so are: Bank of America, Citi Bank, and Capital One.  It is a good sign that it will report if they ask for the social security number of the authorized user. However, note that the Authorized User addition can have no impact if the lender is using one of the newer versions of the FICO scoring model, only the older versions reward you for the age of accounts for which you are an authorized user. A very long term boost is to open your first American Express card underwritten directly by Amex such as their Zync card which is pretty easy to get.  The advantage of American express is that they remember the date your first credit card was opened with them and if you open new accounts in the future they will back date the date of their opening to match the date your first card was opened.  If you let your membership lapse, be sure to record the account number and date opened in your personal files so that you can help them locate it again if you reopen as they can have trouble if it has been on the order of ten years or more. Finally, note that the number of accounts opened in the last twelve months is a small negative mark on your score (along with number of inquiries), so if you open a lot of accounts all at once, in addition to bringing down your average age of accounts, you will also get dinged for how many were opened in the last year. This strategy will have long lasting effects since negative items can persist for many years, making financing a home difficult, the primary source of household credit. It is also very risky.  You can play hard, but then the creditor may choose you to be the one that they make an example out of by suing you for a judgement that allows them to empty your accounts and garnish your wages. If you have no record of late payments, or they are old and/or few, your credit score will quickly shoot up if you pay down to 10% of the balance, keep the cards, and maintain that balance rate. This strategy will have them begging you to take on more credit with offers of lower interest rates.  The less credit you take on, the more they'll throw at you, and when it comes time to purchase a home, more home can be bought because your interest rates will be lower. I was in a similar situation with my now 6 year old.  So I'll share what I chose.  Like you, I was already funding a 529. So I opened a custodial brokerage account with Fidelity and chose to invest in very low expense index fund ETFs which are sponsored by Fidelity, so there are no commissions.  The index funds have a low turnover as well, so they tend to be minimal on capital gains. As mentioned in the other answer, CDs aren't paying anything right now.  And given your long time to grow, investing in the stock market is a decent bet. However, I would steer clear of any insurance products.  They tend to be heavy on fees and low on returns.  Insurance is for insuring something not for investing. Not only should you do this, you should tell your friends to do it too. Especially if a parent comes in to the bank with the child, banks fall over themselves to provide a card to someone whose only income is allowance. Really. Later, if you're 21 and your car broke and you don't get paid for another 11 days, NOBODY will lend you the money (or those money mart places that charge 300% a year will) to fix it. Never mind score (and yes for sure having a good score will be a result, and a good one) just having the card for emergencies makes all the difference to your early twenties. My kids have several friends who now can't get credit cards (some are students, some are underemployed) and end up missing paid days of work due to car troubles they can't pay to fix, or using those payday lenders, or other things that keep you poor. Get one while you can. Using it sensibly means you will have a great credit score in a decade or so, but just plain having it is worth more than you can know if you're not 18 yet. If you are not banking with a credit union, open an account.  Speak with a person there an explain you are wanting to build your credit history.  They will likely have a product designed for the purpose. Also, to agree with duffbeer703, why is your score so low at this point? Make sure your three credit reports do not have anything incorrect on them and challenge wrong items. If everything is fine on the report, you just to have more credit and use it for a longer period of time. I presume you are building credit for a large purchase such as a house.  Please be very careful with borrowing money and do your best to avoid carrying balances. You probably won't get a mortgage. UDSA has a 41% ratio of monthly debt to monthly income limit, and a score of 660 or better. A 250,000 mortgage at current rates for 30 year mortgage is about $1560/mo. (included in this figure is the 1% mortgage insurance premium, the .4% annual fee, the current rate for a 660 credit rating, the 2% points fee added at the front of the mortgage, typical closing cost added to transaction, and the .5% fee for over-mortgage insurance for the first 3 years since your mortgage will be higher than the value of the house due to these additional fees) Credit card payments = $120 ($60 times 2) Car payments = $542 ($271 for your car, $271 for the car you will be getting) Student loan = $50/month Child Support = $500/month Total = $2772/month Your income per month is 82000/12 = $6833/month $2772/$6833 = 40.6%...  This is awfully close to the limit, so they likely would also look at your ability to save.  Not seeing savings in the above example, I assume it is low.  USDA site One mortgage help site breaks down some of the requirements into layman's language. Not knowing your exact location (county/state) and how many children you have, it is hard to be sure whether you make too much to qualify.  This link shows the income limits by number of people in the house and the county/state.  There are few places in which you could be living that would qualify you to any of their programs unless you have a several children. As others have posted, I suggest you get your debt down. I think you've made a perfectly valid suggestion, and, if your son is struggling somewhat financially now, one that may be very welcome. If you agree to forgive the debt at this time in lieu of a similar amount forgone in future inheritance, it will eliminate the never ending interest-only payments, free up $200+ a month for you son on a tight budget, and improve your own credit score once you pay off the credit line. It's also, in my opinion, a good idea to be open about this in advance with your other children heirs so that everyone will understand what is expected during the eventual probate. My paternal grandfather was the recipient of a great deal of financial largess from his wealthy mother during her life, and it was fully understood by him, her, and his siblings, that in exchange he would not share in her estate when she passed. He didn't, there were no problems, and he and his siblings stayed close for the rest of their lives. Sorry. As far as I know, a person's SS is the only way to establish credit. This is the first thing they ask whenever you apply for any service in the US. I would advise against this, answering only the first part of question #1. Borrowing and lending money among friends and family members can often ruin relationships.  While it can sometimes be done successfully, this is most likely not the case.  All parties involved have to approach this uniquely in order for it to work.  This would include your son's future significant other.  Obviously you have done very well financially, congratulations.  Your view for your son might be for him to pay you off ASAP:   Even after becoming a doctor, continue to live like a student until the loan is paid off.   His view might be more conventional; get the car and house and pay off my loans before I am 50.  He may start with your view, but two years in he marries a woman that pressures him to be more conventional.   My advice would be to give if you can afford to, but if not, do not lend.  If you decide to lend then come up with a very clear agreement on the repayment schedule and consequences of non-payment.  You may want to see a lawyer. For the rest of it, interest payments received are taxable. A 529 has a custodian and beneficiary. If, say, my Mom is custodian and my daughter the beneficiary, neither my daughter, my wife, nor I can access this account. In fact, if my daughter chooses not to attend college, Mom can change beneficiaries.  So, a 529 is ideal for what you have described.  By the way, your wife may have broken the law. Money in your child's name/SSN cannot simply be taken from the account at a parent's whim. You have every right to ask for an accounting of that money and insist she return it to your child's account.  Edit - I was going to add that UTMA money may only be spent for the benefit of the child, and not for day to day items, food, clothing, etc. The article The proper use of UTMA funds provides a bit of support to my position on that. If credit scoring works in the UK like it does in the US, then I think the fact that you own+use a credit card and pay off your everyday expenses will give you perfectly good credit.  Just keep doing what you're doing. I have seen people in the United States with very high credit scores based solely upon owning & occasionally using a credit card, paid in full and on time every month. You could conceivably open a few accounts.  For example, a bank account and a credit card account.  Then the accounts will be older when evaluated for credit when you return.  This would look better than opening fresh accounts later.  But don't expect a big difference in score.  And you'll be stuck with those accounts in the future, otherwise you lose the benefit.  I wouldn't worry about maintaining balances now.  You can wait until you come back.  Occasional purchases may be helpful.   What they really want to see is a regular and sustained use of accounts without missing payments or overextending.  But if you're not going to be here, you can't really do that.  Note that good credit scores are based on seven years of data, preferably a lot of it.  Opening a few accounts can't substitute for that, even if you put balances on them.   If you're not here, you won't be paying rent or utilities.  You won't have a proven payment history on the most common accounts.   If money were no object, you could do something like purchase a house or condo that you could rent out, utilities included.  That would build up a payment history.  But if money were no object, you probably wouldn't be worried about your credit score.  It's more practical to just live normally and be sure that you always live within your means so that you don't experience negative credit events.   You might think about why you want a good credit score.  Is it to borrow a lot of money?  You might be able to spend money to achieve that.  Is it to save money on future borrowing?  If it costs money now, how much will you save total?   Opening accounts now that you won't really use until you return is about the only thing that you can do that won't cost you money.  Perhaps put a balance on the bank account--at least you'll get that money back some day.  Maintaining a balance on the credit cards would cost you money in interest charges, and you don't really benefit from an improved credit score until you use your credit.  So the interest fees aren't really buying you anything. K, welcome to Money.SE.  You knew enough to add good tags to the question. Now, you should search on the dozens of questions with those tags to understand (in less than an hour) far more than that banker knows about credit and credit scores.  My advice is first, never miss a payment. Ever. The advice your father passed on to you is nonsense, plain and simple. I'm just a few chapters shy of being able to write a book about the incorrect advice I'd heard bank people give their customers. The second bit of advice is that you don't need to pay interest to have credit cards show good payment history. i.e. if you choose to use credit cards, use them for the convenience, cash/rebates, tracking, and guarantees they can offer. Pay in full each bill.  Last - use a free service, first, AnnualCreditReport.com to get a copy of your credit report, and then a service like Credit Karma for a simulated FICO score and advice on how to improve it. As member @Agop has commented, Discover (not just for cardholders) offers a look at your actual score, as do a number of other credit cards for members.  (By the way, I wouldn't be inclined to discuss this with dad. Most people take offense that you'd believe strangers more than them. Most of the answers here are well documented with links to IRS, etc, and if not, quickly peer-reviewed. When I make a mistake, a top-rated member will correct me within a day, if not just minutes) Exec Insiders have to file with the SEC and some sites like secform4.com track it. But many insiders have selling programs where the sell the same amount every month or quarter so you would have to do your homework to determine if there are real signals in the activity.