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If you want a credit card but some parts of your application make you a less than desirable candidate, you may need to bring on a co-signer to be approved. A co-signer is someone who is legally on the hook for your debt if you’re unable to pay. While many major credit card issuers don’t allow co-signers, some do, and many credit unions and smaller banks often allow them, too.
Credit card issuers like to mitigate their risk. If you add a person who has a good credit score and stable income to your account, the issuer can require the co-signer to make payments if you — the primary account holder — become delinquent. Both you and your co-signer may experience raises and drops in your credit scores based on the account’s standing.
Why you might need a co-signer
The typical conditions for needing a co-signer include the following:
If you have no credit history, issuers will consider you a wild card. Because you haven’t had the opportunity to demonstrate your creditworthiness, you’ll need someone to put his or her credit score on the line on your behalf.
If you haven’t followed good credit practices — such as paying bills on time, using less than 30% of your credit limit, avoiding bankruptcy, etc. — then your credit score is likely to be below the threshold that issuers are comfortable with.
Issuers like to know you’ll be able to pay back whatever balances you accrue, so a regular income is key in determining creditworthiness. If you don’t have a strong, consistent source of income to show on your application, you’ll need a co-signer who does. Just make sure you have a way to pay off your balances once you get the card.
What to consider when getting a co-signer
It’s a big deal to ask someone to become jointly responsible for your debt, so before you do, make sure you have a handle on what that entails.
Your co-signer’s credit score will become tied to yours. For better or worse, as your score changes, so does your co-signer’s. If you practice responsible credit use, any boost to your score is factored into your co-signer's score, too. However, if you miss your payment deadlines, use too much of your credit limit or accumulate too much debt, you could hurt both scores.
Your personal relationships may suffer. If you’re asking someone close to you to be your co-signer, your relationship with that person could be at risk if you fail to deliver on your end of the deal. Be sure to discuss what you and your co-signer both expect from the arrangement and what will happen if you can't make your credit card payments.
You’ll have to address your financial habits head-on. If you wound up with bad credit because of your spending habits or lack of a steady income, you may need to seek additional help to make sure those habits don’t bring down your new co-signer.
You may want to stipulate an end date for co-signer duties. A co-signer is meant to prop you up if you need someone to vouch for your creditworthiness. Once your credit score is in good standing and the account doesn’t carry a balance, it may make sense for you or your co-signer to call your issuer and request to remove the co-signer from the account. Alternatively, you can close the account and open a new one under just your name.
Risk vs. reward of becoming a co-signer
If you’re considering becoming a co-signer for someone else, make sure that person is someone you fully trust. And understand that since you’re liable on the credit card account, you need to have the financial means to take over the borrower’s debt if it gets out of control.
If you’re being drafted as a co-signer, you may want to talk with the primary account holder about sharing account user names and passwords so you can keep an eye on account activity. Check your credit score regularly to make sure the account’s status is being recorded properly with the major credit bureaus.
Although being a co-signer comes with a lot of risk, a responsible primary account holder can boost the co-signer’s credit score by following good credit practices. Once the card has been in good standing long enough, you should be able to remove yourself as a co-signer.
Alternatives to co-signing
If getting or becoming a co-signer sounds like it could lead to too much tension, there are other options for building credit. Potential borrowers can instead:
Become an authorized user on someone else’s credit card. An authorized user is someone who’s been granted permission to use a credit card. That person is allowed to make purchases but isn’t legally responsible for paying off the balance, a task that falls to the primary account holder. If the account holder is following good credit practices, authorized users get to piggyback on that person's good credit score and build their own credit. If the primary account holder doesn’t handle the account responsibly, however, the authorized user’s score may go down.
Get a secured credit card. A secured credit card is backed by cash collateral that the borrower gives to the card issuer. For example, if the issuer requires a $200 deposit, then in return the borrower generally gets a credit card with a $200 limit. This system eliminates risk for a card issuer because if a borrower doesn’t pay the balance, the issuer can take the money out of the deposit. A secured credit card is a way to establish or build credit without having to bring another person into the mix.
Adding a co-signer to a credit card application could be effective with an issuer, but it also could leave your personal relationships in a precarious situation. Be honest with yourself about your ability to responsibly hold a credit card account, and consider your alternatives before you make someone else liable for your debt.