Establishing a good credit rating for a child is a great intent however, is having the debt in the child's name (regardless of the type of debt) in the child's best interest? It is great to have the funds set aside and automatic payments set up but we could ask what if questions all day long. What if something catastrophic happens and that money is needed for something else etc.

A parent getting credit in the name of their child can absolutely be considered identity theft. Whether or not this happens would depend greatly on the outcome of the situation. legalmatch.com/law-library/article/child-identity-theft.html and experian.com/blogs/ask-experian/… are just a couple examples of this happening. I understand your intent is in the right place however as a parent I see too many ways for this to end bad.

The problem with your question is that there really isn't a practical answer. Creditors will not accept a minor as a responsible party for credit because they aren't legally liable. If they can't be the responsible party, it isn't going to affect their credit score.

These blogs both point to the idea that the parent is using the child's identity to obtain credit that they could not obtain on their own. This does not apply to the case where the parent and the child are jointly applying on an account where the parent is using his/her own information to establish credit on behalf of the child. For example, suppose a teenager wants to buy a $1500 car, has a job, is capable of paying the loan, but is unable to obtain the credit.

Suppose now said child quits or loses said job. Now parents don't want to pay said child's loan because they don't want to be responsible for said child debt. Now the parent has obtained credit in the child's name that they would not have been able to obtain on their own.

We could what if all day

In the cases of the blogs you linked, the parent is looking for credit for their own benefit. But if the loan is link to a vehicle or property that is titled in the name of the child--that is, it they own it and will receive the benefits from it.

If I am cosigned on a loan, the loan will be paid, and the child will have to sell the car to me to meet the legal obligation of the loan.

Or sell the car to someone else if there is another interested party.

A child can not waive a parents fiduciary duty. Regardless of the perceived benefit it is a hard sale to say that obtaining debt in the child's name is in their best interest

The fiduciary duty is that everything obtained with a child's financial resources is used for the benefit of the child.

I can't buy a car with the child's money that I am only using for my own benefit. The car has to be used primarily for the child's benefit.

That's fiduciary duty.

I can't obtain credit for my own benefit, only for the child's benefit.

And how much it will help their credit score is subject to debate because the child is not the primary borrower because they can not be held legally liable for the debt

I mentioned above that while contracts can be nullified by a court, that does not mean a child cannot sign a contract while a minor.

They can sign but if they can't be held to the contact dies that matter? Unless they are emancipated which is a whole different subject

The court will determine what the child reasonably understood for the contract terms when determining if all or part of a contract will be nullified.

The question comes down to this. Does the possible benefit of establishing credit outweigh the possible damage done by obligating the child for some amount of debt

If yes you are fine, if no then a patents fiduciary duty is to not put the child in debt

That's not the final question, that's only the question of intent.

The outcome is also considered in questions of fiduciary duty.

Not just possible outcomes.

If I succeed in paying all debts, the courts will treat that differently than if I do not succeed.

The court will only find me in breach of my fiduciary duty if I take actions that cause material damage to my child AND if my actions were for my own benefit and not for the benefit of the child.

But the fiduciary duty is to consider the possible outcomes and do what is best based on the parents assessment of the possibilities

Back to the child actor who has now made $15 millon from contracts that I signed on their behalf to have them appear in movies and TV shows.

I can get a mortgage on a house near where they go to work in their name, but that is HIS or HER house, not mine.

When they turn 18, they can kick me out of that house purchased in their name.

If I invest that money in the stock market to provide them with a residual income stream, that is their income stream when they are old enough to take over the management of it.

If that's the case the question is irrelevant because dais child wouldn't need to establish credit at this point. They could find what they need in cash and should have sufficient cash flow to establish credit on their own once they are no longer a minor. In that case they would be better served by you teaching them to invest wisely

If the stock market tanks, and they lose a significant portion, the courts will examine whether I was following the best practices for investing that money.

They will look at whether any of the investments benefited me in any way.

If the investments benefited me (I invested their money in one of my companies)

I will be found to be in breach of my fiduciary duty

If the investments didn't benefit me, and it was just bad luck that the market crashed,

As long as I was following the best practices, I will not be found to be in breach of my fiduciary duty.

Even though the child was harmed.

If said child has 15 million and you buy them a $20 million home based on the idea that they can continue to act and they suddenly become incapacitated you would also be violating your fiduciary duty

At that point I would have to sell the $20 million home because that child no longer has an interest in living near motion picture studios.

Yes, but that doesn't change it being contrary to you're fiduciary duty. That just means the damage isn't irreparable

If I sold the home and put the proceeds of the sale aside, say now instead of $15 million they are down $1.2 million for realtor fees, they now have $13.8 million, that will not be considered a breach of fiduciary duty, that will be considered bad luck that the child became incapacitated.

If the investment was for the child's benefit, it is not a breach of fiduciary duty.

A home is for the child's benefit, a home that is beyond the means of the child is not a benefit and could be a breach

If I used the child's money to fund my own trip to Las Vegas, that would be considered a breach of fiduciary duty, but purchasing assets, obtaining credit, etc., particularly assets that appreciated (like homes) are not breaches of fiduciary duty.

A real estate investment is no different from the stock market example above.

As long as any REASONABLE person would agree that it was a good investment, the courts will not hold you liable.

That's like saying my child needs a car to get to work. It's the same if I put that child's name on a loan for a Ford or a Ferrari because they will both get the child to work

Beyond the means of the child... the 28% rule is commonly accepted to determine whether a home is beyond that child's means.

You may feel differently, but that is the industry standard.

You can talk all day about what YOUR standard is for whether a purchase is in the interest of the child, but what it comes down to is what the commonly accepted standards are for how much a child can afford and what benefits the child.

The middle child of the Brady bunch just sold a home purchased at the age of 12, with a VERY handsome profit.

But was it purchased with a loan in their name or their parents?

News reports never go into that level of detail.

nydailynews.com/entertainment/gossip/…

correction 11 years old.

Then that example doesn't help any either. There are kids with money but how many of them are not emancipated and establishing their own credit

The point is that the home was in the child's name and owned completely by that child.

And how many have their parents on the loan as guardian

Likely it was only sold now because the parents moved out.

But was it done in a way to help the child build their credit? If not then it isn't a valid example

Because you know, lots of children actually have a good relationship with their parents.

I agree with that

You want to have an argument, I'm just explaining how fiduciary duty works in the real world.

I understand how fiduciary duty works, we just disagree on what qualifies as the best interest of the child

Establishing credit for children is probably not a common practice, hence the lack of answers to my question. That doesn't mean it's impossible, in fact I have several counter-examples that show it is possible for a parent to add a child as an authorized user on the parent's account.

It doesn't matter whether you agree with me, it matters whether the courts do.

I don't want to have an argument, I'm enjoying a chat while I have lunch

Whether a REASONABLE person agrees.

Since that is the court's standard.

An authorized user doesn't always affect credit score. I can add my children as authorized on my accounts, that just means they are allowed use, not that they will get a credit score benefit

It depends on the institution on whether they will report to the credit agencies.

What I've found so far is that AMEX and Discover will allow minors to be authorized users, and they will report for those minors.

To me a fiduciary duty means to take the most cautious, conservative path. I know that way I week not have to later justify my actions. If I have to justify it then it probably fails

My own credit union will allow 16 year olds to obtain credit cards without further approval, but there is no formal minimum age if there is VP approval on having the account established.

I am still researching so I'm not about to answer my own question as if I am authoritative. I just thought someone else out there may have considered this.

I suggested credit unions in my first answer as a more likely method to accomplish what you want to do

Discover has no minimum age for authorized users, but AMEX also picks 16, so that is probably backed up by plenty of cases where contracts at earlier ages were nullified.

What you are trying to do is not impossible, only difficult due to the limited number of groups that would allow such things

Which I also points out in my proviso answer

There is also a possibility that by opening a joint account in the child's name and opening a credit line in my name when the child is young, by authorizing that child as a user when a teenager, the full age of that account is given on the credit report when the child turns 18, which gives a bigger boost than if the account is opened when the child is a teenager.

These are all possibilities, but know one participated in our SE seems to know the details. It's all conjecture.

That's possible, I don't know how that would work

I know whether or not it builds their credit depends on how it is reported. It may or may not work.

I have excellent credit, so all of the institutions that I have cards through seem to want to give me large limits. I would want a card with a small limit to give to a teenager, but should I open that account now will he/she is still a child?

I know that once the score is 800+ it doesn't matter, but the average age of my open accounts is why I'm in the low 800s instead of closer to 850. Not that I even need to apply for any further credit for the rest of my life. But the point of this whole exercise is that if credit is needed, it best to be able to get it on the best terms. I expect my children to quickly transcend the need for credit too, but the best way to do that is to start with a high score.

I have 1 credit card and a home loan and have 800+ credit. Same with my wife. I just don't see a practical reason to jump start my kids on credit. My oldest who is out of the house now is doing fine on his own and in sure the others will also. What counts for kids is a big question mark though. I don't know how they ate reported which is why I tossed a couple ideas