How Can Family Help You Build Your Credit
If you want a sound financial future, it is best to build a solid credit history. But, how do you begin? It is not easy to do it on your own, but with the help of family members, it is possible to learn the credit game and have the confidence knowing you can take out a loan, get an apartment or acquire insurance for your vehicle.
Can Family Help Me Build Credit And How?
You should have a trusted person in the family who you can rely on to help you. It can be a scary proposition if you are just starting out, but everyone was at that same place like you are.
Now, let’s look at how your family can help you build credit:
An Authorized User
If you want to build your credit, you can ask a family member to add you to their account so you can become an authorized user. In so doing, you get to piggyback on their credit. You will receive a credit card as well, even though; you are just an authorized user. You will also benefit from the primary account holder’s credit report and history. This will be even better, if the person has a good credit rating.
As an authorized user, you won’t have to make any payments on the card, but you will be able to access the person’s credit score. On the other hand, if payments are missed on the credit card or the credit card balance is maxed out, it could hurt your family members’ credit score rating.
So, make sure you do this with a family member who is fiscally responsible. Depending on the length of time the person has had the credit card account and their track record, you may immediately see an improvement to your credit score.
Co-signer on Credit Card Application
Your family member could become a co-signer for you when you are applying for a credit card. This is especially true if you are unable to get approved on your own. You would be the primary person on the account this time instead of the authorized user and so this is the ideal opportunity to start building credit so you can have a great credit score later on.
Both of you would be submitting an application for a credit card, which means that the other person is putting their credit on the line too. For this reason, you should be fiscally responsible so you don’t mess up your family member’s credit.
It’s not always possible
Bear in mind that co-signing is not something every credit card issuer allows. You could try a credit union or community bank in your local area because some major banks might not allow this. Prior to submitting your credit card or loan application, be sure to double-check first.
Loan Co-Signing
You could approach a trusted family member to help you by co-signing on a loan for you. A loan can provide you with a better chance of being approved with a co-signer onboard. We here at the Debtry store are not a lender, but we can help you find one. If you fill in the basic information below, we can connect you with a suitable lender in no time.
Most banks allow low co-signing. However, there are a few things to be aware of.
Before approaching your loved one, it is important to note that the loan will also show up on their credit report as well as yours. This could be an impediment to your loved one if they want to apply for future credit on their own. In other words, this would be a debt burden to them, especially, if you should default on the loan. If it is a mortgage loan, it could pose an issue later for them. For example, if you were to miss a payment, it could mess up their credit. The lender would contact the co-signer if it was hard to reach you.
Another thing you could do is to pay your loan on time so you can improve and build your credit to such an extent as to be able to refinance your loan. Once you refinance the loan, you will no longer need your co-signer. This would relieve the responsibility of your co-signer on your loan.
Moving Back Home
If you are in financial trouble or if you want to start a life and need to build credit first to get an apartment, buy a home or take out a loan or credit card, then you could move back into your parents’ home. In so doing, you will be able to afford paying your student loan or a cell phone bill.
This will help you to build credit since you won’t have to be paying rent or other bills. It is a way to live rent-free, but with an arrangement between you and your family member that you are only trying to build your credit to move out. You probably would be able to save up enough money to make bold moves later on so you can become independent.
Taking On Bills
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If you have no bills and you have moved back home, but want to build credit; one way to do so is to take on a few of the bills that your family member pays. However, make sure that the bill is in your name. You could have your name put in the cell phone or cable bill and make payments on a timely basis to develop your credit.
Getting a Family Loan
If you want to build credit, but you are having trouble meeting your credit card or car loan payments, then you could consider getting a loan from a family member. You have two options:
Pay off the balance or a partial amount on the loan or credit card
Put the family loan into a savings account and use it to pay your monthly obligations
Be sure to make those payments on time, even if you have to set up an automatic payment through the bank where you have the savings account.
Getting a Secured Credit Card
A family member can help you to open up a secured credit card account. This is one of the ideal ways you can build credit. Bear in mind, though, you have to pay your credit card bills on time. Most people that don’t have a credit history will usually opt for a secured credit card.
What does this entail? You would put money upfront as a security deposit. You would only use the money you put up. You could use a starting amount of $500, which is the usual limit. You would use the card to make specific purchases; in the same manner like the conventional credit card. This will help you establish credit.
Important Things To Note
It is important to keep credit card balances to the lowest amount possible. When you use most of the funds on a credit card, it reduces your credit score. You should also avoid putting in too many credit card applications. This also affects your credit. It is known as a ‘hard inquiry.’ These stay on your credit report for two years. Each of them will take a few points from your credit score. The creditor looks at this as if you are desperately looking for credit and you are labeled ‘high risk.’
Exercise Patience
It takes time to build credit and so you are going to have to be as patient as possible. It is not going to happen overnight. Stay up to date with your monthly payments so you don’t fall behind. Don’t open a new account until you have paid off the current one.
Conclusion
Credit building is a process. It gets easier when you have someone with credit helping you. A family member who you can trust is the best place to start. It will make you feel more comfortable choosing this option. Discuss this first with that family member before making the decision. Know the pros and cons involved. Stick to your end of the bargain by paying the bill consistently and on time.