 Building
credit with a secured credit card
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 Dear
Dr. Don,
My question is regarding my daughter. She is 19 years old, moved
to Jacksonville, N.C., three months ago and desires a credit card.
She does not have any credit to begin with, but she has been making
the payments on a car loan that I obtained for her. Unfortunately,
the loan is in my name but she has canceled checks to prove she
has made all the payments prior to its due date. I wish to help
her obtain a secured credit card through a local credit union in
the Jacksonville area, or in North Carolina to help her establish
a credit history. Thank you for your help.
-- Lindsey Loan
 Dear
Lindsey,
Her canceled checks on your car loan aren't going
to help her establish credit. With hindsight it's easy to say that
you should have been a co-signer on the car so the payment history
would have shown up on her credit report, but that's water under
the bridge.
A secured credit card is structured with the account
holder putting money on deposit with the credit card provider. The
credit line is usually limited to the amount of money on deposit.
Since the credit line is backed by the deposit, the card company
faces almost no risk in issuing the card. Your offer to help your
daughter obtain a secured credit card is as simple as providing
her with all or part of that deposit.
Bankrate's credit
card search will help your daughter find secured credit card
providers but doesn't limit the search by region. The National Credit
Union Administration, or NCUA, maintains a directory
of credit unions that should help your daughter find a credit union
in her region or state.
The Bankrate feature, "10
questions before getting a secured credit card," will help
you both understand the issues surrounding a secured credit card
and how to transition from a secured card to a regular credit card.
One of the most important things is to ensure that the card provider
is reporting your daughter's payment history to the credit bureaus,
ideally without the account being identified as a secured credit
card. Bankrate's "Baby-step
your way to credit with a secured credit card," is also
recommended reading.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."
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