If you have a good credit score and steady income, you may be able to cosign for a credit card for someone with a more limited credit history.

Cosigning allows you to leverage your solid credit history and credit score to help someone else qualify for a credit card and take on repayment responsibility if the other person defaults. This can be a great way to help your child or another loved one just starting their credit journey or attempting to rebuild a bad credit score.

The steps to becoming a cosigner are pretty straight forward, but there are a few risks you should consider before you agree.

Which issuers allow cosigners?

Most credit card issuers don’t allow the cosigners on their accounts. Currently, only three major card issuers allow for cosigners: Bank of America, USAA and U.S. Bank. Each of these banks has its own restrictions for when cosigning may be permitted, such as only on certain student cards or for applicants under a certain age.

If you’re considering cosigning for someone, reach out to learn more about your issuer’s policies. Community banks and credit unions in your area may also offer more cosigning options.

Risks of cosigning

Becoming a cosigner can be a great help to someone, but it also has the potential to put your healthy credit at risk.

Before you agree to sign off as a cosigner, it’s important to understand your rights and responsibilities.

Cosigning for a credit card is similar to cosigning for a loan. You, as cosigner, become responsible if the primary account holder is unable to make payments. You’ll be liable for any unresolved debt on the credit card that the primary account holder cannot pay.

Activity on the credit account will show up on the primary cardholder’s credit report, giving them the chance to build up a strong credit score. However, activity on the account will also show up on your credit report as the cosigner. This could put you in a risky position, depending on how the primary cardholder manages their credit card activity. For example, if the primary account holder utilizes much of the available credit on the card or makes a late payment, it could impact your credit score.

It can also be difficult to get removed from an account as a cosigner if you change your mind; the cardholder must close their account. And even though you have a legal obligation to pay any delinquent debt on the account, the primary cardholder has sole control of the account and its management.

Alternatives to consider

Cosigning for a credit card is not the only way to help a loved one access credit. If you have concerns about the risks involved with becoming a cosigner, here some alternatives to consider.

Authorized user

Adding someone as an authorized user to your account is a great way to help someone build up a thin credit profile. Unlike cosigning an account, when you add someone as an authorized user to your account, you are the primary cardholder. This means you can add or remove the person as you see fit.

The authorized user will be issued a card and have access to your credit limit, which you are responsible for paying off.

Some card issuers will allow you to set a credit limit for your authorized user so that they can only use so much of your credit limit. Many issuers also report authorized user activity to the credit bureaus, which can help them build up their credit score and eventually qualify for their own accounts.

While being the primary cardholder affords you much more control with authorized users, you are still responsible for any debt accumulated on the account.

In order for your authorized user to benefit and to keep your own credit score in good standing, you should make sure you practice healthy credit habits like paying your balances off in full and on time and keeping utilization low.

Joint account

Like cosigning, many credit issuers don’t offer joint account options, but it can be a good option for taking on the shared responsibility of a credit account.

When you open a joint credit account, you and the other owner will apply together. Both parties are responsible for managing the debt on the account, and the information appears on both credit reports. Having a joint account is a good idea if you share recurring expenses, such as groceries and rent, with someone, but can present complications if you don’t clearly communicate about how the account will be managed.

Secured credit card

If you want to help someone get credit, but have concerns about taking on any responsibility for their debt, consider suggesting a secured credit card to them. People with bad credit or no credit history are more likely to get approved for a secured card than other personal credit cards since they require a deposit which acts as part or all of the person’s credit limit. Secure credit cards can be very helpful for building up someone’s credit score to become eligible for one of the best credit cards on their own in the future.