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5 warnings for a credit card co-signer

Bad marks can show up on your credit report
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Bad marks can show up on your credit report

Late payments, missed payments or collections on the account?

In the eyes of creditors, this is your account, so "you're equally at risk for any sort of negative credit reporting and/or collection activities," says Ulzheimer.

Even if you never have to pay a dime, co-signing with someone who doesn't know how to manage credit or just doesn't do it well can cost you money by eroding your own credit. These days everyone from potential employers to loan officers to insurance companies can look at credit reports.

One smart move: Look at the alternatives to co-signing. A few to consider:

  • Adding the person as an authorized user to one of your credit cards. You'll be responsible for the bill. The other person can build their credit. If he or she abuses the privilege, you can shut off access.
  • A secured credit card. The other person gets a card in his or her own name with a credit limit backed by funds. Most secured cards build credit, and some can convert into traditional credit cards after a trial period.
  • A debit card. With a checking account, the other person can get a debit card. It doesn't build credit, but it also doesn't place your credit at risk.

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