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Dear Quentin,
When my kids were younger, I added them as authorized users on my credit card. I did this in case of emergency, and to jump-start their credit. They are now adults, 25 and 29. My son has his own house and credit card and has a decent credit score. My daughter tries to live a very simple life, farming and living in a tiny house. She is not interested in getting her own credit card.
It might be time for a conversation about removing their authorization from my card. I am looking to find an optimal time and I want to minimize the impact on their credit scores. Note that I never carry a balance unless it is their purchase and can be moved to a fixed payment plan. They send me the money monthly until it is paid.
I suppose one option would be to keep them as authorized users forever, but someday I won’t be here, and that may not come at the best time for them. Yes, I actually think like this. It’s a mother thing. In any case, what would be the best option, recognizing that they are individuals and the plans may be different for each of them?
Helicopter Mom
Dear Mom,
Your children are fully functioning adults. The time has come — and, frankly, gone — to cut those credit-card apron springs. They have aprons of their own now, and they should be able to manage their finances without you looking over their shoulder. You did the right thing: You allowed your children to build up a credit score even before they were old enough to own a card. But now they are old enough to own a house, so they are old enough to manage their own credit.
The idea is to give them training wheels so that when they reach adulthood, they can make decisions for themselves: maintaining a healthy credit-utilization ratio (the bigger the gap between the amount charged on the card and the credit limit, the more favorable the credit score), not carrying large balances every month, maintaining a diverse line of credit (credit cards, car loan, mortgage, etc.), paying their bills on time and paying off their credit card in full every month.
Payment history (35%) and the length of credit history (15%) together make up nearly half of a person’s FICO FICO, +0.29% score. Removing your kids as authorized users will affect their credit history — they will get a temporary ding on their credit score with the three main bureaus, Experian EXPGY, -0.01%, Equifax EFX, +0.60% and TransUnion TRU, +1.24%. It should take three to six months to recover, but it should not hurt their credit score in the long term.
Teaching kids how to use credit cards responsibly appears to work better than handing them your card once in a while to make purchases. Roughly 60% of parents in this LendingTree poll carried out last year said they allowed their child to use their credit card, but more than half of those parents said they lived to regret it. Another 46% said their child had used their card without their permission.
So have the conversation with your children. Encourage your daughter to get a credit card and explain how it will help her build a healthy credit score, which she’ll need should she ever want to take out a loan. Also explain that she is throwing away points and air miles by only using a debit card. But ultimately, it’s time to trust your children to make their own financial decisions. Unfortunately, we often learn the most from the mistakes we make. Tell them, “I trust you. I’m proud of you. And it’s time to set you free!”
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