8 tips for parents to help their children build good credit early

It's never really too early to start talking with your kids about the importance of being careful with your money and establishing good credit habits. It's crucial for young adults to establish their credit history early, so they can access better insurance rates, enjoy a smoother experience renting an apartment, and, eventually, have an easier time applying for mortgages and other types of loans.

The minimum age to get a credit card and establish a credit score is 18, but there's a lot that parents can do to help their children prepare for this milestone. After all, it is still possible to build credit as a minor. CNBC Select spoke to three financial experts who shared their best tips on how to help your child build credit and use credit wisely.

1. Start early
2. Teach the difference between a debit card and a credit card
3. Incentivize saving
4. Help them save early for a secured credit card
5. Co-sign a loan or a lease
6. Add your child as an authorized user
7. Have them report all possible forms of credit
8. Encourage them to apply for a student card

If your child is already a young adult who is ready to start building credit with a credit card, there are a few simple tricks you can teach them about maintaining excellent credit: always pay your bill on time, spend below your means and don't open more accounts than you can comfortably manage. But the best behaviors actually result from early education, not only knowing how the credit game works.

Research shows that children start developing their behaviors around money as early as age three — and they are nearly solidified by age seven.

Developing good money habits can be as simple as giving young children household chores to help them understand the concept of earning money, Tim Sheehan, CEO & co-founder of Greenlight (and a dad), tells CNBC Select.

You can also use stories to teach your kids about good money habits, like the children's book "The Four Money Bears," by CFP Mac Gardner. In Gardner's book, one of the characters, appropriately named Spender Bear, runs into trouble when he buys only what he wants. He must work with the other bears to create a budget that includes saving, investing and donating money as well.

"Spender Bear is high on life until he overspends and loses everything," Gardner explains.

Presenting these kinds of problems during story time is a lot easier than telling your children "no" at the checkout, and it might make them invested in solving the problems of characters they come to love.

When your child is young, they will observe you swiping your card at the checkout, and they will easily make the connection that a card is a lot like cash.

But while a debit card is in essence like cash, a credit card is borrowed money. So well before your child starts using their own debit card, they should understand the difference.

"Having a debit card does not help build credit," Sheehan explains, "but the habits formed from responsible debit card usage translates to more complex topics like credit cards and borrowing."

A number of banks offer debit cards designed specifically for kids and teens. For instance, if you bank with Chase, you can open a Chase First Banking^SM account under your existing checking account and get a debit card for kids ages 6 to 17. Once your child has a debit card of their own, you can begin to monitor their spending habits and positively reinforce their good behaviors, and help them cut back on any overspending or unnecessary purchases.

Rewarding your kids for chores is more effective when you incentivize saving, according to Sheehan, who developed the Greenlight app to help parents teach their children how to responsibly use a debit card (which translates to responsible credit card use later, says Sheehan).

"With the Greenlight app, you can set up weekly chores and tie that to a weekly or monthly allowance," explains Sheehan.

But there is also a parent-paid interest program that rewards kids for putting their money in savings by letting parents send interest disbursements from their checking accounts.

As the kids grow up, they will learn that interest can be earned, but also charged, such as a credit card's APR, when you borrow money from lenders.

If your teenager is interested in opening their first credit card at 18, you might want to encourage them to save up the deposit required to open a secured credit card. In some cases, if you have a savings account at a bank or credit union, you can borrow against that account to open a secured card.

For example, if your teen opens a savings account at the Digital Federal Credit Union (DCU), they could save toward a deposit on a DCU Visa® Platinum Secured Credit Card. 

On DCU's website, it states:

"If you are looking to establish or improve your credit history, this credit card is a great way to get started. By allowing you to borrow against your DCU savings account, this card gives you all the benefits of DCU's Visa Platinum Credit Card."

Benefits include no cash advance fee and optional overdraft protection that lets users link a credit card account as a backup to their DCU checking account to avoid overdraft fees.

Rod Griffin, director of public education and advocacy for the credit bureau Experian, tells CNBC Select that this strategy accomplishes two things: teaches teenagers credit card basics and establishes good savings habits.

"They understand that if they fail to pay their credit card bill, their savings account is going to be taken away and they are going to get a ding in their credit score," Griffin explains. But if they do it right, they can continue to grow their savings while also building good credit.

If you're not interested in joining a credit union, you could recommend your child apply for the Discover it® Secured Credit Card. It stands out because Discover automatically reviews cardholders' accounts to see if they can transition them to an unsecured line of credit starting seven months from account opening. It also offers valuable cash-back rewards and a generous welcome bonus.

"Helping a 16- or 17-year-old get a used car loan can be a good way to build credit," Griffin tell CNBC Select.

While this strategy may come with some risks to your personal credit score, if you believe your teen is trustworthy enough to make the payments on a car loan, it can be a great way for them to establish credit without opening a credit card.

They might also need a little help getting approved for their first apartment lease, and you can be a co-signer to get them started. In some cases, they can ask their landlord or property manager to report their rent payments with Experian RentBureau to help raise their credit score.

An auto loan, student loan or other kind of installment loan could help add to your child's credit mix, which makes up 10% of their credit score. but you will need to understand whether the laws in your state allow children under 18 to co-sign a loan, as well as when each loan will show up on a credit report. In most cases, you can ask your lender these questions in detail.

Similarly, adding your child as an authorized user is a great way to help them build credit before they turn 18. A child generally only needs to be 13 to 15 years old to qualify as an authorized user and start building credit, while some card issuers have no minimum age requirement at all (read about the minimum ages for each card issuer).

Before you add your child to your card, call your card issuer to confirm that their activity will be reported to the credit bureaus (most major issuers do). Otherwise, it will have no benefit to helping them establish a credit history.

Once they are on your account as an authorized user, they can use your card independently for purchases online and while they are out and about. As authorized users, they may also gain access to many of the same benefits as the primary cardholder, such as airport lounge access. Even better, many credit cards, such as the Capital One Venture X Rewards Credit Card (see rates & fees), don't charge an additional fee to add authorized users.

But don't let the learning stop there; Griffin encourages parents to sit down with their teenage children to go over what a credit card statement is so they understand what responsible card use entails.

"At the end of the month, walk them through the billing statement and talk about what it means to repay, what happens if you carry a balance and pay interest, what the future consequences are if you don't pay that bill and it impacts your credit," he encourages.

"It can be hard because money is such an emotional topic," says Griffin. But since adding an authorized user comes at some risk to your own credit score, it is important that you trust your child's ability to handle the responsibility and agree on spending uses and limits.

It can be tough for a young adult to establish credit, since 15% of a person's credit score has to do with the length of time they've been a borrower and their overall financial history.

But there is a rather new solution to this. Once they turn 18, your child can open a cell phone, internet or utility account in their name and sign up to have their payments reported to the credit bureaus.

With services like *Experian Boost™, they can grant the bureaus access to their "telecom and utility bills," says Griffin. This is a broad term for internet, cable and cell phone accounts, and utility accounts such as gas, electric and water.

Once a person agrees to the service, all of their payment history, reaching as far back as two years from the time of signup, will be added to their credit report.

In the past, utility and cable companies only reported to the bureaus once an account fell into delinquency, explains Griffin. But now, positive on-time payments can count toward building their credit. And in most cases, it helps.

"The people who do rent reporting through Experian see their credit scores increase, or they become scoreable for the first time," Griffin tells CNBC Select.

For many people, a student credit card is the first credit card they open. That's because most student cards give college students enrolled in a two- or four-year college the chance to build credit. Some even let them earn rewards and receive student-centric benefits.

Your teen must be over 18 and have a proven source of income to apply for a student credit card, and most require that the student is also a U.S. citizen (though some are available to international students).

The Discover it® Student Chrome has a strong rewards program for college students frequently filling up their gas tank or dining out, with 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, then 1%. Plus, earn unlimited 1% cash back on all other purchases automatically.

"The world can be unforgiving, and we don't want kids to get into tremendous trouble one day," Sheehan tells CNBC Select. It is important to start early when teaching your children about credit cards and incentivize good behavior that will help them build credit when they are ready.

Good values start early, and in many cases, they are solidified before your child is even old enough to drive.

But experts agree  — it's better that your kids make mistakes as children and teenagers than when they are adults with higher expenses, and potentially even families of their own to support.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of personal finance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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Information about the DCU Visa® Platinum Secured Credit Card has been collected independently by CNBC Select and has not been reviewed or provided by the issuer of the cards prior to publication.

*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.

For rates and fees of the Discover it® Student Chrome, click here.

For rates and fees of the Discover it® Secured Credit Card, click here.