Starting out in real estate with no credit history or a low credit score makes it a little more difficult to get as much done. This is why I have been sharing ways to build your credit. In my previous posts we have covered where to find credit scores and make sure all information is correct. We also talked about what affects credit scores, secured loans as well as secured credit cards. This post is about another way to help boost your credit, leveraging someone else’s good credit.
Trust is Critical
While each credit building avenue has its own individual challenges, some may find this one to be more difficult than the others. I am talking about having someone co-sign for you or someone willing to add you as an authorized user on their existing credit account. For either of these two options, you will have to find someone, typically family or close friend, who already has an existing good credit history. They must also trust you financially.
Many creditors will offer the option to extend credit to applicants, with lower credit scores, along with a co-signer. When offered a co-signer, you have the option to still receive the line of credit if you find another party to also sign on the application. Some people may have some difficulty finding someone willing to do so. This is for the simple fact that, if the original applicant doesn’t make the proper payments or becomes default, the co-signer will be solely responsible for repayment of the balance due. If you are offered credit with a consigner and are able to find a willing party, you need discuss the terms of the agreement with your co-signer. Once they enter the contract, it is very difficult to be removed. Also make sure that you are financially ready for the commitment to ensure you don’t leave a friend or family member in a bind.
Becoming an authorized user is another somewhat difficult way to help establish credit. However, if you have someone willing to assist you, it is a good way to do so. What this means, is to have someone with a current credit account add you as an authorized user on their account. This will not only help build you credit, but it will also give you full access to their available credit. So again, you will need to make some kind of arrangement with the person who agrees to do this, in order to prevent any unnecessary issues for them or yourself. Also make sure the primary user checks with their creditor to ensure that they report authorized users to credit bureaus as well.
With either of these choices, you will have someone putting their trust in you. A co-signer will trust that you will make your payments on time, and not leave them owing the balance of your debt. Someone adding you as an authorized user will be trusting you with access to their account as well as keeping up your end of the agreement with payments and any other factors. Make sure that you are ready for the responsibility that comes with this trust if you decide to use a co-signer or become an authorized user in order to rebuild your own credit.