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If you’re relatively new to credit, or if you’ve made credit mistakes, you may find help in an unexpected place — your parents, grandparents or other older relatives.
Credit scores tend to rise as people get older. Experian’s latest State of Credit Report showed that the youngest consumers, ages 18-22, had an average score of 641, compared with 710 for ages 56-74 and 731 for consumers 75 and older. The report, released in December, looked at the VantageScore 3.0 scores of a “statistically relevant sampling” of its database.
And these older, high-scoring consumers may be able to give you a leg up by making you an authorized user or co-signing for you. What you’re looking for is someone who has stellar credit, high credit limits and, preferably, a very old credit card.
And if you strike out? There are also strategies that can help you get good credit on your own.
Authorized user status
Credit expert John Ulzheimer, who has worked for credit bureau Equifax and credit scoring company FICO, says becoming an authorized user is his favorite credit building and rebuilding strategy.
You can ask an older relative or friend with excellent credit to add you as an authorized user on his or her credit card account. This doesn’t necessarily mean you expect to make charges. Authorized users do not need to use — or even possess — the credit card. Having the account on your credit reports can help you benefit from the account holder’s credit history.
“It helps tremendously for those that have little or no credit history, less so for those who have a damaged credit history,” says Jeff Richardson, head of marketing and communications at VantageScore.
Using a credit card responsibly as an authorized user can be good training. “It’s like having a credit card with training wheels and a safety net,” Ulzheimer says.
If your credit score is low because of some missteps, being added as an authorized user is still useful. While its effect is more limited, “it’s always helpful to repopulate your credit reports with positive information,” Ulzheimer says. “Be realistic with your expectations. If you’ve got a long history of derogatory credit entries, it’s going to take years to fully recover.”
How it can help you: The account’s credit limit adds to your overall credit, which helps an important factor called credit utilization. And if the card issuer reports the date the card was opened, your average age of credit will jump.
Things to watch out for: Authorized users can see their credit scores dip if the primary user pays late or begins to have high balances.
Co-signing is agreeing to be fully responsible for paying a debt if the primary borrower does not pay as agreed. Sometimes a person with poor or no credit needs a co-signer to qualify for a loan or credit card.
Richardson says his first experience with credit was with a credit card his parents co-signed when he was in college. Their agreement was that he charge nothing but textbooks. It worked well; he says he finished college with good credit. However, he warns, “there need to be parameters and rules.”
How it can help you: You may be able to get credit or an interest rate that you would not otherwise receive. Having credit in your name, rather than being an authorized user, can carry more weight with lenders because you are responsible for repaying the co-signed credit card or loan.
Things to watch out for: Both borrowers are on the hook if a payment is not made, and a missed payment can hurt both people’s credit. It can also make it harder for the person who co-signed to qualify for additional credit.
Going it alone
Don’t have an older relative to lend you a little credit mojo? Your credit cards are likely to have low limits, because you don’t have a strong credit history. But you can still use your card and be rewarded for using only a small portion of your credit limit. The portion of your credit you use, credit utilization, has a powerful effect on your score.
You can hack your way into a low credit utilization by paying online as soon as purchases are posted.
Or, you can put a relatively inexpensive recurring charge — such as a streaming service — on a credit card and use it for nothing else. Put that card on autopay to avoid late payments and let low utilization help your score.
There’s no easy way to increase the average age of your credit cards, but be aware that age counts, so keep your first accounts open unless you have a compelling reason to close them.
Finally, pay all bills on time. One skipped payment can have a devastating effect on your score.