By Erica Sandberg Sent: Monday July 19, 2010
Erica Sandberg is a credit expert and columnist for Creditcards.com. She is also the author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

Should you co-sign a loan or credit card for a friend or relative? I get this question a lot, as the economy makes it harder for people to obtain loans—and the new CARD Act makes it tough for those under 21 to get credit cards in their own names.

1. It's your debt now. As a co-signer of a credit card—or any bank loan—you are responsible for any money owed. If a friend or relative decides to charge a $3,000 trip to Mexico, say, you are liable for that debt.


2. Your credit is on the line. If the co-signee makes late payments or defaults, guess who the lender will come after? Not only could you end up paying for their debts, your credit would take a hit.


3. Protect your score. In rare cases, when you 100% trust the person, you may want to co-sign. But just remember that their debt will show up on your credit report, and could make you look overextended to creditors, who heavily weigh the percentage of your available credit when calculating your score.

Last, if you're a college student—or know one who is thinking of co-signing on a card for a friend, I have a better idea. Tell them to get a job, even a part-time one. According to the CARD Act, if 18- to 21-year-olds have a regular income source, they don't need anyone else to guarantee the account.

Bottom line
Have you ever co-signed a loan? What happened?

Erica Sandberg is a credit expert and columnist for Creditcards.com. She is also the author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

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