Consumers can build credit without a co-signer
Over the last several years, a lot of attention has been paid by consumers and businesses alike to the importance of building and maintaining a good credit score. But one of the issues that millions of Americans faced in the wake of the economic downturn was that it because much harder for them to qualify for credit, and others may have had borrowing histories damaged so badly by their tough financial circumstances that it was difficult to do so.
Indeed, some people - having been locked out of the credit system by financial difficulties during the recession that arose through no fault of their own - have now gone without credit for so long that it appears they have no borrowing histories at all. Others simply have never had the opportunity to borrow in the first place. And in either case, these are people known as "credit invisible," whose borrowing histories are so limited, long in the past, or non-existent that they simply cannot be "scored" by lenders.
What does this mean?
Effectively, these circumstances result in consumers not being able to qualify for credit, even if they know for a fact they can afford it, simply because they do not have the demonstrable borrowing history to show lenders they pose little to no credit risk. That can be incredibly frustrating and even financially painful for many Americans who may rely on credit access to help them do necessary things like buy a new car or cover emergency costs as affordably as possible.
What can be done?
The good news is that there are ways to build a positive borrowing history without bringing a co-signer into the picture. This often comes through credit cards - either secured or unsecured - that are available specifically for people with little to no credit backgrounds at all.
However, when dealing with such accounts, consumers should use as much caution as possible. That's because the lenders that extend these types of cards to "credit invisible" borrowers are still dealing with perceived risk, and mitigate that risk by charging more for the access to such credit. For example, that can come in the form of high monthly fees, or through inflated interest rates that can significantly increase the size of a balance in just a month or two, as long as a balance is carried over.
The good news is that these cards are designed specifically for beginners or people just getting back on their feet as far as credit is concerned, and use of them can (and should) be discontinued after six months or more of use. By that time, consumers who have kept up on their payments and avoided racking up major debts on those accounts will likely have built up enough positive momentum to borrow more affordably with different accounts or lenders.
In addition, though, consumers looking at this option may also want to think about the benefits of alternative credit scores, such as those from PRBC. These ratings take into account things like rent and utilities payments to make a person's financial situation clearer to many businesses, including lenders.