More stringent requirements has led some credit card companies to require a co-signer. Before you agree to co-sign, whether it be for family or friends, be sure to read the fine print, discuss it with the cardholder, and know what you're liable for by signing.
As a prospective co-signer, you may not realize that:
- The debt may be yours. If the cardholder can't or won't pay, you're next in line. And a card issuer wouldn't ask for a co-signer if it thought it could collect from the cardholder.
- Your credit score could drop. If the cardholder can't make the payments, that person's credit rating--and yours--is affected. And, that ding on your credit report could mean that your own loan application is denied.
- You could be sued. If the cardholder you cosign for ends up with thousands of dollars of debt, the credit card company takes that person--and you--to court to collect. You have to reveal all your assets and risk losing them to pay for purchases you didn't make.
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