George Kamel - This "Credit Hacking" Trend Is Risky

Episode Date: April 25, 2025

📈 Are you on track with the Baby Steps? Get a free personalized plan.   Call me crazy, but babies shouldn’t have credit scores . . . and neither should mom or dad. In this episode, find out why this viral hack is a bad idea and what you can do instead to help the next generation be smart with money.   Next Steps: • 🎥 Watch my video I Have Zero Credit and Tried Renting an Apartment. • 📙 Listen to my audiobook, Breaking Free From Broke. • 💵 Start your free budget today. Download the EveryDollar app! Connect With Our Sponsors: • 🔒 Get 20% off when you join DeleteMe. • 💸 Learn more about opening a high-yield savings account with Laurel Road. Explore More From Ramsey Network: 🎙️ The Ramsey Show   🍸 Smart Money Happy Hour 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 💡 The Rachel Cruze Show 🪑 Front Row Seat with Ken Coleman 📈 EntreLeadership   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

Have you seen the viral money hack parents have been doing to help their kids build credit? Well, it's actually not that new, and it's been around long enough for us to know that it can do some serious damage to your kids' financial future. So in today's video, we'll talk about how this little hack works, why it could be disastrous, and what you could do instead to set your kids up to win with money. But before we dive in, slap those like and subscribe buttons, and share this video with everyone you know who is a parent, who is going to be a parent, and who owns a parent. Pirates got to learn about money somehow. All right, so what is this money hack people are doing for their kids? Well, I think this TikTok sums it up best. Rich people help their kids get perfect credit scores

long before those kiddos can apply for their own credit card. And it's not even that complicated. I can explain it to you. As soon as my kid is born, I'm going to set them up as an authorized user on my credit card. As you can see, with the exception of Discover and American Express, most of these credit card issuers don't have a minimum age requirement. This means I will be issued a credit card with their name on it,

but I'll be responsible for paying the bill. And you're probably wondering, what does a baby need a credit card for? Yeah, I'm wondering. They don't. Instead of giving the card to them, I'm either going to cut it or I'm just going to put it in a safe location. I will then proceed to make on-time payments on my credit card bill every single month. By doing so, I'll start building good credit for my kid, allowing them to leech onto my good credit. By the time they finish high school, they'll have built a credit history of 18 years and have a score in the high 700s or even 800s.

This will help them rent their first apartment or qualify for a great credit card of their own. Okay, so basically parents are adding their kids, sometimes even their babies, as authorized users on their credit cards, which means the kid's name is attached to the card, but they're not legally responsible for the debt. Sounds like the babies are winning here. I would watch a movie where a baby is the authorized user, spends a ton of money somehow,

and the parents are left picking up the pieces. And the baby's sitting here in this mansion going, Not my debt, not my problem, capish. Why is the baby in the mafia? That's what we all want to know. That's where the plot thickens. Sundance, I'm coming for you. Kans coming for you.

Tribeca. Remember this face. So the idea here is that since the parents' payment history is reported to the credit bureaus, their kid will start building a positive credit history and have a nice shiny credit score by the time they turn 18. Sounds smart, right? Well, so did the segue, and we all know how that turned out. The truth is, this little credit card hack is unnecessary, it's risky, and it's a bad idea overall. Here's why.

First of all, if you mess up, your kids pay the price. You miss a payment. You max out the card. It goes into collections. All of that negative history gets reported to your kid's credit file. So imagine being 16 and already having a wrecked financial life because dad forgot to pay off the draw stress for less credit card he opened, just so he could get 10% off a shirt that says, I'm not lazy, I'm just energy efficient. That's actually, that's a good shirt.

I would buy that shirt. That's funny. It's a good. Do they make that shirt? Oh, wow. A lot of different fonts. Most of them regrettable. I like, oh, there's a cat.

What is he? There's a cat on pillows with glasses. I don't know why the cat has glasses. Okay. Glad the internet is doing well. The second reason this is a bad idea. If your kid messes up, you pay the price, parents. Some parents are actually giving their kid a card link to their account.

I guess so they can get some practice using someone else's money to buy things like jelly cats and squish mullows. So the kid racks up charges treating it like free money, and boom. Parents are on the hook for the bill. And if you think your kid would never do that, let me remind you, they used to eat dirt and crayons, and Timmy is still huffing those Smensel's Gormay Scented No. 2s. That's the gateway drug to vapes, and we all know it, parents. You thought nothing was going to happen from huffing all these markers? Tide pods. Boom, that's your fault, parents.

Tide pods are soap, and that's not food. And another reason I would never do this, it teaches your kid their wrong money habits. Instead of learning how to budget and save and spend wisely, your kid learns that borrowing money is normal and that their financial future depends on a three-digit score. That's like teaching your kid that fitness is all about the number on the scale instead of their overall health. It's just bad logic.

And this is not the first time I've talked about this. Recently on the Ramsey show, Rachel Cruz and I reacted to that exact clip. And people jumped at the chance to share in the comment section how this had happened to them. Let's check it out. My mother used to use my name for bills

because she couldn't pay them. Let me tell you how hard it is to come back from that when you find out as an adult. I knew a woman who did this to her kids because she was so irresponsible and now her kids are grown and it's causing them grief.

There we go. Thank you for the honesty, Roger. Here's a horror story from Victoria. I know two people who had their credit ruined by the time they were 18 and were thousands and thousands of dollars in debt because their parents put all the bills and credit cards under their name as children without their knowledge or consent.

And it's not so easy to get it removed. You want to help your kid get ahead, open a savings account for them, and teach them how to budget and balance a checkbook before middle school. My goldfish needs a credit card. Don't know where that's coming from. People apparently found this funny. Why are we encouraging Mark on this one? I need a sound bite of Rachel saying,

Puzz. Let's see what I said. I would be pissed if I turned out. That was a pretty good delivery on that. Only to be followed by this comment, I love the way he says baby, L.O.L. Opening a credit card for a baby. Also good delivery. Acting classes are paying off. Once again. The worst thing that ever happened to me was debt. You cannot do this in the UK, thank goodness. Thank you. You're up. At least you're doing something right over there. Okay, this is a good one to end on. My parents did this for me when I was nine. I was able to buy a BMW M3 new at the age of 18 because of it. Worked out well. Who's going to tell them? It was a terrible idea to take on whatever car payment that was as an 18-year-old with a luxury car. He can't even afford the insurance on the...

Why are we doing, parents? And they think it worked out well. Shame on them! That's enough comment section for a day. So it would seem this little hack has turned out not so great for a lot of people. And here's the deal. In a best-case scenario, like you saw with some of these people, everything goes perfectly and according to plan your kid could get a favorable credit

score. But just because something could work doesn't mean it's a good idea. Like sledding in a kayak. And I'm being told, we have a clip. Let's see what that's about. And what is his brain dead dumb doing? Oh no. Oh.

Oh. Oh. Oh. That is the dumbest thing I've ever seen a dummy do. Great narration. Holy crap. Okay, back to this credit score issue. Even if your kids end up with a good credit score, what does it actually mean?

Let's talk about it. Well, it turns out the credit score is just an I love debt score. It doesn't measure wealth. It doesn't measure success. It doesn't even measure financial responsibility. It just measures your relationship with debt and payments. But parents are still going to do this because we live in a credit score obsessed culture. People think that a good credit score is the key to getting ahead in life.

And you know who loves this? Dabanks. Because the earlier your kid is convinced they need a credit score, the earlier lenders can trap them in the cycle of debt and make them think, oh my gosh, you have a 760, here's more debt. You should want more payments, borrow more money from us. Give us more interest. But you know what's better than a good credit score?

Money in... The reality is, if you handle money the right way, living below your means, avoiding debt, saving, investing, you don't even need a credit score. And before you bombard the comments section with... But George, how old my kid rent an apartment without a credit score? How are they going to rent a car? Cool, your plastic, patsy.

You can do all of those things without a credit score, and I've made plenty of videos to prove it. I've been living my life like this for 13 years now, and I've done it all without a credit score and without a credit card. You can even buy a house without a credit score. I've done it. It's called manual underwriting.

Lenders just look at your actual income, savings, payment history on utility bills, insurance bills, rent. Imagine that, making lending decisions based on actual financial stability instead of some made-up number. Wild. Now listen, I know. Parents, you love your kids. You want them to be financially successful. And adding them as an authorized user on your card might seem like a shortcut. But all it does is reinforce the idea that they need a credit score to win with money.

And it's just not true. They need to learn money management, not debt management. So if you want to set your kid up for financial success, ditch the credit score session and focus on teaching them how to handle money the right way. And I'm going to share with you six practical ways you can do that. No games, no scores, no cap. But before we talk about helping your kids, let's help you get your personal info away from shady spammers and scammers.

And the way I do this is by using Delete Me, the sponsor of today's video. Delete Me finds and removes your info from hundreds of data broker sites out there that sell your info for a profit. And they'll even send you a report showing you where, they found and removed your data and how much time they saved you. And so far, they've saved me 86 hours, which is more time I can spend watching videos of sledding fails, my new obsession. So help protect yourself with risks of online scams and data breaches with DeleteMe. Right now, you can get 20% off any of their annual plans by going to join Deleteme.com slash George or click the link in the description below.

Okay, now that you know why this credit score hack is a bad idea, let's talk about some good ideas for teaching your kids how to handle money the right way. Number one, teach them how money works. If you want to give your kid a financial head start, teach them how to earn money, how to save it, how to spend it wisely, how to give generously, give them opportunities to work for money so they learn the connection between effort and reward. And while you're at it, teach them how to budget. Teach them how to budget, teach me how to budget, teach me how to budget, teach me how to budget.

And if you think that's the widest thing I've done, you should see me on the pickleball court. Next up, number two, help your kids build a savings muscle. Teach them the importance of having an emergency fund to pay for unexpected expenses instead of relying on some credit card company. And you can even help them get started by opening a savings account for them. That's a smart move. Show them the power of compound interest, let them see that this is how their money grows,

that wealthy people earn interest for people pay interest. And it's okay if they don't earn much here. This is less about making money and more about building the habit of saving and delayed gratification, which is the opposite thing a credit score teaches them, which is, I want it now and someone will let me borrow the money today. Like I always say, teach a kid to fish. No, seriously, I think we should just teach more kids how to fish. I think that's just an important life trait.

I didn't learn growing up. Still don't know how to do it today. Wouldn't know how to do it. You put me in a body of water? I'm dead. I'm going to starve within three days. I'm toast. More fishing, less sniffing pencils.

Put that on your little shirt at Ross Rest for Less. And number three on our list of good ideas to teach your kids. Open a Roth IRA for them as they earn money. So when your kid gets a little older, they start earning income from a part-time job dressing up as Elsa for toddler's birthday parties, you can open up a Roth IRA in their name and start investing for their future. Now, if they keep investing money here as they get older and continue to earn, this little head start could make a big difference thanks to compound growth. Next up on the list, teach them to live debt-free.

If your kid can learn early on that debt is a trap and not a tool, they won't have to spend their 20s and 30s trying to dig their way out of it, like most of America. And if I'm you, I want my kid to avoid the dumpster fire that is, the student loan crisis. And that means developing a plan early on to figure out how we're going to get a debt-free degree. Now, this could be a mix of college savings and a 529 plan or an ESA, scholarships, grants, part-time work, and most importantly, choosing the school you can afford instead of the one that's going to cost you six figures in loans. Next up on the list, show them how to buy a car the right way. When the time comes for them to get their own wheels,

teach them to save up and pay cash for a decent used vehicle. Not at 18 getting a BMW M3 on giant payments because they had a great score thanks to mom and dad. That teaches them nothing. Saving a few thousand bucks might sound impossible to a teenager, so help them break it down. For example, if they can find a decent old car for $5,000, show them how they can save $500 a month and have enough to buy the car in just 10 months. And maybe you even match what they save to incentivize them and help them get that car a little quicker. And last but not least, make sure their first house is a blessing, not a burden. The teachable moments here don't have to stop just because your little ones grow up and leave the nest. When the time comes for them to buy a place of their own, teach them about saving up a down payment and using manual underwriting to get a mortgage without even needing this I love debt score.

Show them how much more interest they would pay with a 30-year mortgage versus getting a 15-year mortgage. And maybe you even match what they save for a down payment or even gift them some money to give them a leg up. Because who knows what a three-bedroom townhome will cost by the time Timmy's ready to get a place of his own. Probably $1.3 million if I'm being generous. So there you go. Do those six things to teach your kids about money at a young age, and they should never even have to worry. about a credit score. They'll have something way better, actual money and no debt, and you know, financial peace, all that good stuff. And if you're hesitant to ditch your own credit cards,

I get it. It's not a normal thing to do, but it's a smart thing to do. And if you want to know how to live a great life without credit or even a credit score, be sure to check out my book Breaking Free from Broke, the ultimate guide to more money and less stress, especially the audiobook version, which I read myself. And I love hearing stories from parents who have used this book and audiobook to teach their kids about money. So I'll drop a link to it below so you can listen to it in the van on the way to soccer practice. And check out what happened in this next video when I tried renting an apartment with zero credit. Keep watching or click the link in the description below. As always, don't forget to like and subscribe and share this video with your friend who's currently

adding their kid as an authorized user to their raw stress for less credit card. It's not worth it, not even for the shirt. Thanks for watching. We'll see you next time.