|How to establish a great credit score
Consider secured cards
Another option for getting started with plastic is
a secured credit card. A secured credit card acts
like a regular, general-purpose card but is secured
with a deposit, usually for an amount equaling your
"You put up X amount of dollars, $300
or $500, and you're issued a credit card that looks
like everybody else's credit card -- it's not stamped
'secured card' or anything so you're not embarrassed,''
"But the issuer has no risk as you charge and repay that debt each month as you build a positive credit history," she says.
Get a bank loan
Consumers with a thin credit file and a good relationship with a bank or credit union may be able to get a loan using their savings account as collateral.
"As you pay back the loan, the bank will report your good borrowing behavior to the credit bureaus, whereas they would never report your checking or savings account," Watts says.
Alternatively, borrowers who can't quite get a loan on their own could consider finding a co-signer. For responsible borrowers, co-signing a loan can be a great way to build credit. The key word is responsible.
In this borrowing scenario, instead
of the bank assuming the risk of lending money, the
other signatory shoulders most of the burden. Many
a well-meaning co-signer has been burned by flibbertigibbets
-- children, friends, boyfriends and other assorted
associates whom they mistakenly thought would pay
back the loan.
"If the primary borrower defaults, it
will show on the co-signer's history and the lender
is going to go to the cosigner expecting payment,"
"Frankly, on the other side of that coin, one of my recommendations is for people never to co-sign. It has to be on the table in this case," she says.
Similar to co-signing, piggybacking has attracted plenty
of controversy, though for different reasons.
The term refers to the practice of using someone else's good credit as a way of building up your own.
For instance, if a mother adds her daughter to her credit card as an authorized user, the credit card company will not check the daughter's credit history and the daughter, as an authorized user, assumes no obligation for the debt, but the credit card company will report the account on the daughter's file.
"It's not necessarily a positive way
of doing it. Some lenders view that as being a little
bit sneaky -- especially if you do it with someone
that you don't have a defendable relationship with,"
Ulzheimer says. "(A) father and son, (or) husband
and wife -- that is a different story than two complete
strangers that are doing it. Lenders take a dim view