Credit > Establishing Better Credit(1) Better Credit The concept of the "friends and family" approach is that you "assume" the good credit rating that a trusting friend or family member has already established. One way of doing this is to have a friend or family member call their credit card company and allow you to be listed on their credit card as a joint applicant. The credit card issuer will send you a card in the mail. A credit card company will submit a report to the credit reporting agencies and your report will be updated with the positive payment record that your friend has accumulated over the years. As your friend continues to charge on his card and pay faithfully, he will continue to build credit for you. You may want to consider taking the same approach with other cards or with other friends. Arrange in advance to "cut the credit card up" or return it to your friend or family member when you receive it in the mail. If your credit is not sufficient enough to be approved for a loan with good terms, you can build credit by having a friend or family member cosign on a loan for you. When you are approved, you can arrange for the friend or family member to control the loaned amount so as to avoid any repayment complications. Your friend or family member can take the loaned amount and put it in a savings or money market account, or invest it as they see fit so the account will earn interest. They can repay the loan out of that account to ensure that you do not cause financial hardship or credit damage to them. You may have to make an arrangement with the cosigner to pay for the additional interest that you are charged on the loan if the return on their investment does not overcome the interest that is charged. If you have a trusting friend or family member and you are confident that you will be able to repay the loan, you can use the funds to refinance higher interest rate debt. When adopting the "friends and family" approach, it is best to be honest and up-front with the person from whom you are assuming the good credit. If you violate a friend or family member's trust, not only will you lose a chance to help repair your credit, you may even lose a trusting friend. |
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