Bad Credit Boot Camp

An OppLoans Guide to Understanding Your Credit, Credit Report, and Credit Score.


Without any credit, essential things like signing a lease or buying a car can be difficult to do, because you may not be able to find a landlord or car dealer willing to do business with you on your own. And that’s where co-signing can help.

When someone co-signs on a loan with you, they are using their (presumably better) credit score to underline yours, and are taking on partial responsibility for your debt. If you fail to pay back your loan, they will be on the hook for your remaining loan balance. Keep up to date on your payments, and you’ll not only boost your credit score, but also theirs.

Having or being a co-signer can be risky because you are essentially tying your credit to the other person’s credit.19

Becoming an authorized user on someone else’s account

Getting a co-signer is not the only way to piggyback on the good credit of a friend or family member. If you’re close with someone who has a good credit score, becoming an authorized user on one of their credit card accounts enabled you to inherit the credit history of that account.20  Become an authorized user on the credit card account of someone with a score of 850, and you can literally go from having zero credit to having perfect credit in the blink of an eye.

If you have good credit and want to help out someone who wants to build credit, before you add them as an authorized user on your card you need to understand that the new user will have access to all the credit in your account. For example, if you’re a parent looking to help child kid build credit by adding them as an authorized user, you are giving your child access to your full line of credit. If your credit limit is $50,000, an authorized user has the legal right to use all of that to buy themselves a houseboat if they want, and you’ll be on the hook for the bill.


“Ask someone if you can be an authorized user on their card. Be sure that person has good credit! Your credit history will be attached to their credit rating.”

-Financial Counselor Roslyn Lash-

Pay your student loans on time

Yup, there’s an upside to that towering mountain of debt you racked up in college. In the eyes of the credit bureaus, student loans are similar to mortgages or car loans – installment loans you take out all at once and pay back on a monthly basis.20  Student loan payments are reported to all three credit bureaus, so if you make your payments on time every month, your credit score will rise over time.21

That being said, student loans aren’t something you should enter into simply for the purpose of building credit. If you can avoid taking them out, you should. Student loans cannot be discharged in a bankruptcy case, which makes them – despite their low-interest rates – much more permanent and risky than other methods for building credit.


Rent-reporting services

You might think paying rent on time would help your credit score. After all, when you pay rent you make the same payment every month and there are fees for paying late, which is similar to paying off a loan. In fact, most credit reporters do consider rent payments to be a tradeline, or san account that can be recorded on a credit report, which puts them in the same category as a mortgage or car loan.21  All three credit bureaus will report rental information if they receive it, but  FICO estimates that less than 1 percent of credit reports contain rental information.

There are two big explanations for the absence of rental information on credit reports. The first is a FICO issue. While there are two newer versions of FICO scores that include rental information, most lenders use a version of the FICO score that does not include rental information. The other reason? Most landlords and rental companies simply don’t take the time to report their tenant’s rent payments to any of the credit bureaus.

However, if you want to use on-time rent payments as a way to boost your credit, it’s possible for you to do so with a little extra effort. First, you’ll need to seek a loan or credit card with a lender who you know uses the newer FICO algorithms, called FICO 9 and FICO XD. Then you can pay a rental reporting service, like RentTrack, ClearNow or eRentPayment to send your rental payment history to the credit bureaus. These services range from free to around $100 a year, so if you are considering a rental reporting service, you should shop around for the best deal. You’ll need to get your landlord on board to accept rent electronically, or verify your rent payments, and it’s also important to remember that not all lenders will factor in this information, unless your desired lender uses FICO 9 of FICO XD, there’s not a very compelling reason to pay for a rent reporting service.


What about utility bills?

Unfortunately, utility companies do not often report their customers’ payment history to the credit bureaus.22  In fact, if they want to do this, they have to pay a fee, so there is very little incentive for them to report on-time payments. However, miss a payment or pay it late, and suddenly they have every incentive to report you to a collection agency – they want their money! In general, while utility bills aren’t going to have a net positive effect on your credit, not paying them on time has the potential to seriously damage your score. Make it a priority to pay your utilities on time every month.

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