Building credit with a secured credit card Ask Dr. Don by Don Taylor, Ph.D., CFA, CFP • Bankrate.com

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.

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