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Many people have had to deal with debt problems, such as a defaulted credit card or loan. Thus, it is easy to sympathize with family members or close friends who have a bad credit score and are in need of a co-signer for a credit card application. However, there are certain facts that should be known before agreeing to be a credit card co-signer, as it is usually a long-term commitment for both parties. Co-signers are directly vouching for the financial reliability of the cardholder and therefore bear much of the same responsibility including placing their own credit score on the line.

Consequences of Co-Signing

If the cardholder reliably pays the monthly bills on time, then there will be no repercussions for the co-signer. However, if the cardholder is not reliable, making payments late or not at all, then the credit score of the co-signer could be damaged. It is important to emphasize these facts to the cardholder, and no agreement should be made unless the cardholder can commit to this responsibility. If the co-signer doesn’t feel their family member or friend will adhere to the terms of the agreement, then they should strongly consider denying the request to co-sign and another option, such as a secured credit card, should be suggested.

Co-Signing Agreements

The co-signer should only accept the responsibility with the willingness to assume the monthly payments if necessary; otherwise not only financial repercussions could develop but also the friendship or family closeness could be lost. It is best to set specific agreements with the prospective cardholder before co-signing. It’s wise to agree upon a set credit limit, and the cardholder should be required to notify the co-signer in the event of an expected problem, with at least a week’s advance notice. Some co-signers even require access to the account online or through a branch office, as it provides the ability to monitor the risk to their credit score.

Co-Signing vs. Authorized Users

A less common option for the person with bad or no credit is to enlist a friends or family member as an authorized user on the credit account. Over time this boosts the main cardholder’s credit score, allowing them to acquire a separate card. Unfortunately, this sort of credit card is rare, and most banks prefer co-signers.

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