Boosting another's credit rating w/ co-sign...
 

Can you do this?

Let's say I have crappy credit and a friend of mine has excellent credit and I co-sign with him on a card.

If I had him keep the card and use it for a year, would that raise both of our credit scores, or does that work differently when it comes to co-signing?

Basically I have this idea... I have NO credit history and can't get a credit card for the life of me (yet I own a house and have another account open when I had my bathroom redone - both of which I make payments on time AND put WAY more than is needed down toward principal), so I was going to have my mom co-sign w/ me on a card.

I'd then build my credit up over the course of a year or so, and once it was high enough, I would then co-sign (on a different card of course) with my friend, who has insanely bad credit. I would still keep the card and use it frequently while (hopefully) continuing to boost both of our credit ratings.

I guess it's kind of "cheating", but will it work?

i'm no expert but i do know that co-signing is accepting responsibility for the primary signatory's balance in the event that he cannot pay it. if that signatory is your friend with insanely bad credit, can you trust that he'll pay responsibly?

If you own a house in your name, you have credit history (not counting equity). If you want to build credit with a credit card but they won't give you one, ask about a secure credit card (where you give X money and you get a card with X limit). Looks the same as a regular card on your credit report.

Thanks for the replies, but (and not to sound like a smart-ass), I already know all that. :)

What I asked is:

Can you build another person's credit on a card when you co-sign with them without them actually using the card?

Basically if the person w/ good credit ONLY has the card (don't give the card to the bad credit dude), can he then raise the other person's score?

The person with bad credit would never even TOUCH the card once, but since the other person co-signed, I'm assuming they could use it while simultaneously raising the other person's score. Is this correct?

From my experience, having my mom's signature on a car loan did very little for my credit except that it let me get a lower APR at the time. When I decided to get a new car and do it all by myself, I was denied anything close to the APR I had before.

In answer to that question I believe that the only score that would improve would be that of the original signer.. he is the one that is taking the actual responsibility... then again.. if ya trust the person .. try it .. I could be wrong.

If you add someone to one of your long standing perfectly paid credit cards as an authorized user...

IT WILL SHOW up on that persons credit report and CAN improve their credit score. You don't even have to give that person a card.

If that's your question then YES.

If co-signing for someone else's loan will boost that other person's credit score? This will eventually happen but initially (for all parties concerned) your credit score will lower as you have 'new' debt obligations, and balance to maximum is always high at loan inception. Off the bat this will produce a score reduction.

-bear

edit: Remember that adding someone to your roach, maxed out, lots of lates credit card will drop the person's credit score as well. The only thing this is effective for is adding, say, a perfect ten year history, on a low balance, high limit credit card, perhaps from parents or an older sibling. It's really the extra ten years of credit history that will significantly boost credit scores.

j8ear: Actually authorized user doesn't mean anything when it comes to credit scores. Authorized users have no financial responsibility for the account, just permission to use it, and therefore it will only show up on their credit report as an authorized user. It's not a positive or a negative mark on the credit report. I found out all about this when I purchased my home and discovered that my parent's had a couple store credit cards that I was an authorized user on and that was the first I knewa bout it.

When I was in college, my parents gave me for emergency use only, an American Express card, I was an authorized user on the card, but the card was in my name. Having a credit card in my name, allowed me to use that card, (which I never used) to get other credit cards in my name, so it was a jumping off point in establishing credit for me.

Did it do anything to my father's credit? Not a thing. But having that card allowed me to get credit cards on my own.

No, because a co-signer is only a promise to pay in the event the original signer defaults.

I have actually watched (pulled reports daily from Equifax) my FICO score increase from 635 to 722 as soon as I was added as an authorized user.

In fact, I have actually watched my FICO score vary significantly when disputing a tradeline, and then it being verified, disputed again, and removed. I have seen scores change with balance reductions, new debt obligations, new inquiries, and when inquiries fall off.

My credit history went from 3 years to 15 years, as a result, and still had zero negative marks on it, but now the perfect payment history stretched back 15 years. My open account limits went from 5000 (with a 1000 balance) to 55000 (with still only 1000 of balances.)

It absolutely works. I secured a fixed 5.875% apr mortgage and 1.9% vehicle financing as a result. Rates reserved for those with the best credit.

-bear