Should You Consider a Credit Co-Signer?
If you’re young, have little to no credit history, or are looking to rebuild your credit history after bad credit or a financial disaster, a credit co-signer might be in your best interest. This is a person who is going to vouch for you as creditworthy, regardless of what your credit report says. While it might be a good idea, in both theory and reality, there are some things to keep in mind. A co-signer situation is not something you want to take lightly.
What It Means
When Uncle Bill signs his name on that line, he is not only vouching for you; he is laying his own credit on the line and taking on some potential financial responsibility himself. This means Uncle Bill had better be able to trust you in the first place or he could wind up in a world of financial hurt.
Responsibility
If you’re going to use a co-signer for any kind of credit, your co-signer is going to have to have pretty good to excellent credit in the first place and reasonable income. As for you, lack of credit or bad credit is the whole reason you are using a co-signer. You need to make sure you have the income to back the credit you are receiving and to make those payments on time each and every month. If you default, Uncle Bill has to pay, and not only will he be unhappy with your lack of responsibility, he might repossess the item he co-signed for or could even take you to court over the money he is out. After all, Uncle Bill most likely paid anyway. He doesn’t want to see the good credit he has built up through the years getting flushed down the toilet.
Considerations
You and your co-signer must have mutual trust and must work together to keep things going smoothly. If you have a hard time, talk to your co-signer to work something out, even if you have to pay them back when you are on your feet again. You do not want to ruin your chances of building the credit you so desperately want and need, nor do you want to destroy another person’s credit in the process. Always use a co-signer that you know well, and always do your part. Be cautious, as a co-signer relationship with someone close to you can become a disaster if there is a default on the account. Who wants to see a friendship or family relationship strained or destroyed over financial matters?
As long as you use a credit co-signer with caution and responsibility in mind, it can be a great way to help you build your credit and gain some independence as well.
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