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Unlike other forms of debt, credit cards don’t typically allow co-signers. In fact, some major credit card companies state openly on their site that they will not accept a co-signer.
If They’re So Unpopular, Why All This Talk about Co-Signers?
Despite many financial institutions unwillingness to allow co-signers, nearly all of them list a co-signer as an option for building credit or obtaining a credit card.
There are a number of reasons you may need a co-signer. If you have not yet established credit or have poor credit, adding a co-signer could help you obtain a credit card.
You may also need a co-signer if you are under 21 years of age. The Card Art of 2009 requires that applicants ages 18 to 20 who cannot demonstrate an independent ability to make their minimum payments have a co-signer on their credit card account. The co-signer can also be in the form of a joint account holder or a guarantor.
A Co-Signer’s Commitment
Obligating yourself to be a co-signer can have a significant impact on your personal credit. A co-signer commits to cover all credit extended to the cardholder if the cardholder is unable or proves unwilling to pay. If the cardholder is not making payments, the co-signer is obligated to cover the debt.
Additionally, while being a co-signer does not improve your credit score, it can adversely impact your credit if the cardholder misses payments. For this reason, many co-signers are parents or other close family members. By serving as a co-signer, you tie your personal credit score to the behavior of the cardholder. Before committing to be a co-signer, consider the pros, cons and alternatives.
In addition to the financial obligation, the co-signer must be over the age of 21, demonstrate an ability to make minimum payments on the line of credit, and have sufficient credit to qualify for the credit card.
Where to Apply for a Card Card With a Co-Signer
Currently, no major financial institutions allow for a co-signer to be added during the application process, as you’d see on student loan applications. However, upon further inquiry, Bank of America does offer a similar option.
Bank of America
According to bank representatives, Bank of America does not offer credit cards that allow co-signers. However, if a student applicant applies for a credit card and is denied the bank will send out a guarantor letter. A guarantor makes the same financial obligation to repay any monies the cardholder borrows and is unable to pay.
However, Bank of America steers away from the term co-signer, this may be because the initial application does not allow for a co-signer to be added upfront. More likely it’s due to the more clearly delineated collection process. While a co-signer is obligated to pay any missed payments, a guarantor is committing to pay the debt if the cardholder defaults.
A Bank of America representative also indicated that if a card applicant is approved, they can add an additional co-applicant. In this case, the initial applicant would need to have sufficient credit to qualify independently and then the applicant with insufficient credit or income could be added later.
Local Banks and Credit Unions
If you are committed to exploring the co-signer option you may want to consider smaller local banks or credit unions. If the co-signer is an existing consumer, co-signing may still be an option.
If you don’t qualify for a credit card as an individual, there are a variety of alternative options to consider.
Banks like Wells Fargo and U.S. Bank allow for joint accounts or co-applicants. In the case of co-applicants or a joint account, both parties’ names appear on the credit card and are listed on the bill. Joint account holders and co-applicants each receive a credit card. And both account holders are responsible for the monthly payment regardless of who made the purchases.
Activity on joint accounts is reported to the credit bureaus for both parties and impacts your credit score positively for demonstrating responsible behavior or negatively for missed payments or other risky activity.
Instead of co-signing on someone else’s card, you can add them as an authorized user or signer to your card. This option allows you to extend your credit to another person by permitting them to make purchases.
This choice gives you more control of the impacts to your credit. You remain the solely responsible party on the credit card and can choose to remove the authorized user at any point. The authorized user is not set up to make payments to the card provider, so if a payment agreement is desired, you could arrange that with the authorized user directly.
Listing someone as an authorized user can help build their credit. The authorized user will benefit from the payment activity and each on-time payment made while the user is authorized on your account will improve their credit score as well as the length of time the credit account has been open.
Secured Credit Cards
A secured credit card is a fantastic option for building or rebuilding credit. While most credit cards allow unsecured debt, your credit limit is secured by a savings account that contains the credit limit your lender is extending to you. For example, if your secured credit card offers a credit limit of $500, you would put down a deposit of $500 with this card provider while making your regular minimum payments.
A secured credit card builds your credit exactly the same way as an unsecured card. And once you have a sufficient history of timely payments, the card holder can re-evaluate your credit risk and move you to an unsecured card. At this point they would refund the balance in the connected savings account.
Serving as a co-signer can negatively impact your credit. Before making this commitment, clarify whether you will be notified of account changes and ensure that you are in a trusted relationship with the cardholder. You may want to request a credit limit that you can safely cover if required.
If you have no credit or a low credit score, consider a credit card to help rebuild credit. You may be able to qualify individually. If you are a student over 18 but under 21 and can show income, you will likely qualify for a student credit card without a co-signer. However, your credit limit will be based on the bank’s determination of your ability to pay.
In general, most large banks shy away from co-signers for credit cards. If you are unable to obtain a credit card without a co-signer, consider a secured credit card or ask a relative to add you as an authorized user.
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