It used to be that any college student with a pulse was bombarded with a multiplicity of credit card offers. Each issuer had a student card program, and the issue of needing a cosigner never came into play. Many students obtained these credit cards, and, unfortunately, an appreciable number of them got in over their heads with debt. In response to this, newly passed laws have put in place severe limitations surrounding credit cards issued to those under the age of 21. Applicants under the age of 21 are now required to show they have sufficient income required to pay back the credit being offered them. Many full-time students do not have appreciable income, and the only route towards obtaining a credit card now involves getting a cosigner. The first candidates for cosigning invariably are mom and/or dad.
When faced with the decision on whether to cosign for your child’s credit card, there are several factors to consider. First, is your credit even good enough to help? Should your own credit be bad, then the bank will most probably not accept you as a cosigner making the issue moot to begin with. Conversely, if you have good credit, then that brings up the second component of this decision process. Are you willing to risk your credit under the assumption that your kid will use the card responsibly and make timely payments?
The risks posed by this question can be addressed by taking a few proactive steps. If you decide to become a cosigner, then ensure that the card’s initial credit line is sufficiently low to prevent a surprise major obligation popping up in the future. Furthermore, keep tabs on the card’s balance and payment history — should it appear that the account is on the verge of delinquency, then you can make the payment yourself in order to protect your credit. If done correctly, cosigning for a credit card can help your child start to develop the credit history they will need soon after graduation. If done incorrectly, it can lead to the loss of your own good credit.