Discovering My Dad’s Credit Line – Was He Helping Me or Hurting My Credit Score?

Some parents try to help their kids build credit before they’re old enough to take out credit cards. However, one Redditor in the Personal Finance subreddit wasn’t convinced. The individual said that their dad opened a credit line for them to build the original poster’s credit score.

On the surface, it looks good. The credit line only had one missing payment over 14 years. If that missed payment was several years ago, then it won’t have an impact on the original poster’s credit score. Furthermore, a 14-year credit history is good for credit age.

However, the balance on the credit line is close to $3,000. We don’t know the credit limit, but an existing balance isn’t good for someone’s credit utilization ratio. Furthermore, the Redditor has had issues with student debt and another debt item that they are paying off.

The Redditor just found out about it and removed themselves from the account. Commenters shared their thoughts on the situation.

The Credit Age Is A Big Help

Your credit history makes up 15% of your FICO score. This metric continues to bolster your credit score as your credit accounts get older. An extensive credit history tells creditors that you have plenty of experience with managing debt and keeping up with payments. 

Credit age was the father’s biggest contribution, as a 14-year-old credit line is more than what the original poster could have done. It seems like the Redditor is either in college or just out of college, so they wouldn’t have been old enough to open a credit line and have 14 years on it.

Credit Utilization Ratio and Payment History Show Some Concerns

However, there is a concern with the missing payment. This isn’t a big deal if it happened several years ago, but if it’s recent, it is still weighing on the Redditor’s credit. Furthermore, the debt of almost $3,000 currently brings the Redditor’s credit utilization ratio to 48%. That’s what the Redditor said when responding to a commenter.

A 48% credit utilization ratio will hurt your credit score. It’s good to have this ratio below 30%, but you will get the best results if your credit utilization ratio is below 10%. If it will take the father a long time to pay off the debt, assuming the original poster is an authorized user, it may be best to remove the account from their credit profile.

That’s because credit utilization makes up 30% of someone’s credit score. A bad credit utilization ratio can minimize the impact of a good credit history, especially if there are late payments. Furthermore, you have to make well above the minimum monthly payment to get out of debt. Too many people let their credit card debt linger with minimum payments instead of more aggressively paying off the principal. 

Adding Your Child As An Authorized User Can Do Wonders For Their Credit

Several Redditors left comments about the merits of adding a child as an authorized user. One parent said that they added their daughters to a couple of credit cards instead of giving them credit cards. Then, the daughters started their adult lives with FICO scores in the 700s and continued to build their credit.

Other commenters echoed the same thought and were grateful for the head start they received. A credit score in the 700s can help you access some of the best financial products at the most competitive rates. It’s a high enough credit score to get a mortgage, but you also need a sufficient debt-to-income ratio to seal the deal. Ultimately, adding your child as an authorized user to your credit card can give them a great head start if you make on-time payments and maintain a low credit utilization ratio. 

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