How to use piggybacking to establish credit

by Lynnette Khalfani-Cox, The Money Coach on January 21, 2011

in Credit Scores


piggybacking to build credit

Q: “I am 29 and I just borrowed money from my bank to establish credit. What else can I do to establish credit without hurting myself? I am not able to get any loans or hardly anything because of my lack of credit.”

A: I understand how it is to be young and trying to establish credit. So let me offer you a couple of tips. One way you can certainly establish credit is to piggyback off someone else’s credit rating.

If you can get added as a co-signer or an authorized user on someone else’s credit card for example, that could bolster your credit rating. You would be able to add that person’s credit history essentially to your own credit file.

Now, of course you would only want to do this with someone who has good credit not bad credit or so, so credit. Do this only with someone with a great credit rating. And obviously you would want to do this with somebody you trust.

Another way though you can establish credit, if you have not been able to get a credit card or other loans, is to seek out the secured card.

A secured card is a credit card essentially but, what happens is that you put up a certain amount of money, say, $500, and you put it into a bank account. The bank that issues you the secured credit card uses the $500 deposit that you have put on hold there as your credit limit. Then you make charges or purchases and then you pay those off at the end of the month.

So let’s say, you charged  $50 over the course of the first month. Then you would pay off the balance, and that would help establish your credit rating.

Now the key in picking a credit card issuer or bank that will offer you a secured credit card is to make sure that it’s an institution that reports to the three credit bureaus, TransUnion, Equifax and Experian.

There are actually a number of secured card issuers that don’t report to the credit bureaus. That’s not going to do you any good. You don’t want to go with one of those.

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