Can a teen build up his credit to get a car loan later?

My 16-year-old son wants to get a loan to buy a car once he turns 18. Can he start building his credit now to qualify for the loan, and if so, how?

Answer
There are a few ways in which your son can start building his credit history:
  • Get a secured credit card. A secured credit card is linked to a checking or savings account controlled by a parent. Both the parent and the child can make deposits and the limit is equal to the total amount deposited into the account. This is a conservative way for a minor to begin building credit.
  • Open a wireless phone account. Some wireless carriers will open accounts for customers as young as 16. It’s important to read the user agreement carefully to make sure there are no long-term commitments that may be undesirable. But provided that the payments are made on time, this information is reported to the credit bureaus and helps improve the minor’s credit score. Late payments, of course, have the opposite effect, so it’s important to have a plan that your son can keep up with.
  • Be made an authorized user on the parent’s account. Whether it’s your credit card or checking account, making your son an authorized user puts his name on the account and he will start to build his credit history.
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Jim Donaher
Answered on Mar 12, 2021
Jim Donaher is a freelance writer and manager with over 35 years' experience in the insurance, banking, and investment management businesses. He provides expertise on a range of topics and is able to explain complex industry information in layman's terms. Jim is the author of two books, including Call Him, He's Home: A Guide to Prayer for Regular People and Then Larry Smiled, a novel about life, death, accountability, and salvation. Taormina, Sicily is his happy place!
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