Apply For Credit Card With Cosigner or Not?

fresh start with moneyMaybe it’s your son or daughter, boyfriend or girlfriend, best friend, or even your own parents. All of us have someone in our lives with credit problems. If they would like to get a credit card with a cosigner and have asked you to be that cosigner, here are some very important things both of you need to consider…

Victim? Or playing the victim?
I’ve known (and currently know) many people with bad credit. Of course, almost all of them believe it’s not their fault! Each person I know has various excuses and theories to back up their claim (which they truly believe). However from my experience, more often than not that person is usually to blame!

Now I’m not saying everyone who has ruined their credit is at fault. There are circumstances like catastrophic and unexpected medical bills (and insurance wasn’t possible beforehand) and certain job loss scenarios. But often times it was just irresponsible spending that caused the credit problems either in full, or in part (i.e. If someone was living beyond their means before unemployment, they are at least partially to blame for the debt problems which followed).

So who deserves a bailout (a credit card with cosigner) and who should be left on their own? Well, here are three very important things both parties need to consider:

Caveat #1: Both parties will be held responsible

When there are cosigners on a card, both parties will be responsible for all account history that follows… both the good and the bad.

That means late payments, high credit limit utilization, and in the worst case scenario – defaulting – will all affect the cosigner’s credit history, in the same way as if he or she did that on their very own credit card! On the other hand, the person that already has bad credit doesn’t have a lot to lose out on (when it comes to their credit) if these events happen since their credit is already ruined.

So in a nutshell, a credit card with cosigner is a huge risk for the person with good credit, and little to no risk for the one that already has messed up credit.

Caveat #2: Nothing destroys more relationships than money

Okay, I’m not claiming that as a statistical fact, but there’s no arguing that many relationships get ruined due to money issues. Whether it’s a friend or family member, is it really worth risking a healthy relationship just to get a credit card?

Personally, there are many relationships in my life that were ruined because of money. Some are very dirty stories and I’m going to refrain from discussing those in this article. Instead, let me give you one of the simple, “tame” examples:

When I was 20 or 21, I was friends with this kid named Justin who was the same age as me. However to call him a friend may be a stretch, because our relationship was mostly centered around a spec literary project we were working on together for several months.

One day he called me up pleading to borrow money, $50. Not a lot, right? Well, it is if you are unemployed, broke, and living in Los Angeles like I was! Regardless, I gave him the money on the verbal agreement he would pay it back within the next month or two.

In the weeks and months that followed, he never made an effort to pay any of it back. Mind you, he was the one with a steady paycheck, not me! Yet he would frequently tell me about how he was out at a club the night before, or some other costly activity which I couldn’t afford myself. He seemed to always have money for those things… just not any money to pay me back.

Ultimately, our friendship faded into the abyss after several months of this. There was no big fight. There was not even an argument about it. It really just came down to the principle of the situation… if this guy would so blatantly stiff me, is he the type of person I want in my life? Nope.

So that’s just an example of a loose friendship and only $50. But how about when the stakes are higher… a credit card with a limit in the thousands and the cosigner’s great credit history on the line? That’s a storm that has the potential to damage even the best of relationships. Is a credit card worth jeopardizing your relationship?

Caveat #3: A cosigner isn’t the only option

Cosigning is an easy way for someone with bad credit to get a credit card, but it is not the only way.

It’s possible to get a secured credit card, regardless of how horrible the applicant’s credit history is. With these cards, a security deposit is put up when the account is opened – that amount become’s the credit limit.  Sure, it won’t be a fancy-shmancy credit card with rewards, benefits and all the bells and whistles, but what it will be is a card that can help rebuild credit if used responsibly.

These cards typically come with fees, but that’s a small price to pay to prevent a relationship from going sour. To learn more about them, check out this section about rebuilding credit.

Conclusion?
Before you apply for a card with cosigner, or agree to be a cosigner, think long and hard about what will happen in a “worst case” scenario.

 
Comments
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Cosigning isn’t always bad. I’ve had bad experiences with my 2 children I helped even though my mom and I knew better. His car was in my name so I got him a car title loan and he only paid less than 5 payments and I paid it off. My daughter and son-in-law needed one and every month they paid me late. I paid it on time or early. I never told them because he worked and she was a stay at home mom. But they paid it off early. Another relative got a hold of my information and ordered over the phone with a prepaid credit card in my name. I was stuck with everything they ordered after the first time. Now my mom has to cosign for me to get a credit card even though I have paid off every loan early and they report to all of the credit agency how reliable that I am.

Chase Bank suppose to have a credit card with a cosigner, NOT, you can have a authorized user, Get it straight, CHASE

While it’s true a secured card is an option, not only is the deposit usually extremely high, but the fees are as well. Most people in need of rebuilding their credit have limited funds. Granted co-signing is borrowing, make certain whomever you do this with is one you have a LIFETIME commitment with.

I have never had a credit card, never any type of credit whatsoever, I have paid cash for everything I own including my car which I paid $6,000 for and then had to pay registration etc. But my credit score is destroyed by a hospital bill that I could do nothing about.

My mom had me on her insurance until I was 18 [currently I am 21] and when she switched jobs [from the local casino, to a company called OHI] her insurance lapsed through her other company and she picked up a new insurance from the new company she worked for. That means that when I went in for surgery [verrrrryyyyy shortly after] I had the ENTIRE bill with no insurance. I then had several follow up appointments THEN ANOTHER surgery!!! Which followed by 3 times a week [Monday, Wednesday, Friday] DR appointments at the hospital!!!

Now, this entire time I had no insurance and no job! I couldn’t work because of the injury! I currently owe the hospital about $13,000 which is in collections on my credit score, which is currently sitting at 343? 347? whichever is the lowest according to my credit check.

Now I read somewhere you could tell companies a story like mine and they could look past my credit score and still give me a card. I have applied for a few, but nowhere does it give me the option to share my story with them, leaving me feeling as though all hope is lost.

I am 18 years old I need a co-signer to help me apply and get a credit card with Discover. Can you help me please?

As you can probably tell from the post, I’m not too enthusiastic about getting cards with a co-signer. If you are 18 and want to get a Discover, my recommendation would be to start with a lower tier card and then apply for the Discover in a year or so. A secured card is a good way to start building credit but there will be some fees:

http://creditcardforum.com/content/secured-credit-cards-rebuild-credit-22/

However if you are a student, then those cards are the best option since most have no annual fee:

http://creditcardforum.com/content/best-credit-cards-college-students-8/