Q. My son has never had any official credit, although he has rented apartments, paid his own bills, and made big purchases in the past. Now he wants to buy some real estate, but his application for a credit card was denied. He is afraid that a string of “credit denied” responses will affect his record even though he has considerable savings. What do you suggest?—Jenny Lidington, Snohomish, WA
A. First, your son should check his credit denial letter, which will explain the top four to five reasons why he was turned down. That provides something of a roadmap for what he needs to do to build his credit rating. Denial also entitles him to a free copy of his report. Check for erroneous information and the possibility that an identity thief opened accounts in his name and harmed his credit rating before he could establish his own good reputation.
You can help your son establish creditworthiness by making him an authorized user of your credit card (your account and good rating will show up on his credit report) or co-sign a car loan with him (which provides collateral to secure the loan and provides the mix of credit types that lenders look for). A secured credit card, which requires a cash deposit as collateral, is another option. Don’t try to open too many credit card accounts; lenders don’t like that. One or two is plenty. And avoid department store cards, which are less favored by credit scoring models.
Our credit card buying guide will help you avoid any gotchas.
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This article also appeared in the June 2014 issue of Consumer Reports magazine. Additional information and advice was added on May 15, 2014.
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