Give your kids a piggyback toward good credit

If the only way to get credit is to have credit, it can be hard to break into the realm. Maybe you don't care about having a credit card (good for you if you can live without one!), but what happens when you want a loan for a new car, house, or even just need some credit references for a new apartment or cell phone plan? You may not need credit cards, but you've got to have credit, and it can be tough to get your foot in the door, especially for a young adult.

Lenders are more wary than ever, so you'll want to have a good, solid credit history before you ask for a loan of any kind. One of the simplest ways for a young person to establish credit is to piggyback on his or her parents. A parent with established credit can add a child as an authorized user on a credit card. The credit company won't require a credit check on the child, as long as the parent remains the primary cardholder, but having the child's name on the account will establish a credit history.

Parents need to establish some ground rules here, though. As the primary cardholder, the parent will ultimately be responsible for all the charges. If you don't want to give your kid free rein with your money, insist that they pay for what they charge, and keep the limit low just in case. Use the card regularly and pay it off each month to establish a good credit history. It's best to start early with cards like this so kids can have a well-established credit history by the time they are ready to take out loans in their own names.

Piggybacking on parents is a great way to get started with your own credit history, but keep in mind that lenders will be wary of those who piggyback on just anyone. If your credit history begins with your parent or spouse's credit cards, fine, but when it's someone who's not closely related to you, that can raise red flags.