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Should You Cosign on a Credit Card?

Should You Cosign on a Credit Card?
Written by Publishing Team

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Signing a credit card with someone is like parachuting out of a plane with them. If all goes well, you’ll be back on your feet with your credit scores boosted.

But it’s also risky – if someone derails the agreement by making late payments or creating too much credit, it could hurt both people’s finances as well as their relationship.

And that happens more often than you might think — about one in five designers experience a drop in credit, and one in five end up paying debts that aren’t theirs, according to a survey by Bankrate. That’s why personal finance experts usually caution against anticipating if alternative options are available.

Here’s what you need to know before agreeing to sign for someone else’s credit card — and other alternatives that might work best for both parties.

What is a Cosigner Credit Card?

A credit card originator is someone who signs a credit card agreement with another person, usually to help the other person qualify for a card for which they would not qualify. Any credit card charges become the responsibility of both the card account holder and the signatory. Unlike a cosigner, a cosigner does not have access to the account or its funds – only the liability for the debt.

If you sign on behalf of someone and they fail to pay their bills, you are contractually obligated to pay that debt. This is why wholeness is a decision that should not be taken lightly. It can hurt both your money and your credit score if it doesn’t go as planned.

“There is also potential risk to your personal relationships,” says Rod Griffin, senior director of public education and advocacy at Experian credit bureau. “If you expect friendship with a friend and that friend does not pay that debt, you will lose trust in him, you will get angry with him, and you may lose that friendship. If it is a family member, it may be worse in some ways.”

Before you sign for someone, have a discussion with them about their budget, how they intend to use the card, and their plan to pay it on time and in full each month. “It’s very important to have some kind of written agreement, even if it’s your son,” suggests Beverly Harzog, a credit card expert and consumer finance analyst with US News and World Report.

Why would someone need a Cosigner?

In general, a person may need a cosigner because they cannot qualify for a credit card or loan on their own.

If someone is building credit for the first time or if they’ve had payment problems in the past, they may need a cosigner to qualify for a new card, Griffin says.

When someone uses a credit card, they borrow money and pay it back when the bill is due. Banks and credit card companies want to make sure they’re repaid, which is why they’ll consider a borrower’s credit score—which shows how likely the borrower is to repay his debt—when deciding whether to approve them for a credit card. Griffin explains that having a cosigner with a good credit score gives the lender more confidence in repaying the debt. This is why it may be easier for someone with bad credit to qualify for a card if they have a cosigner with good credit.

Someone may need a cosigner if:

However, keep in mind that not all credit card issuers allow cosigners to be used, says Harzog. In fact, most major exporters do not.

Does validation affect your balance?

Signing up can affect your credit either positively or negatively. “When you sign in for a card or have someone sign for you, that credit card account will show up in both your credit history and the other person’s credit history,” Griffin says.

This means that if the account holder holds credit from month to month, your debt-to-income ratio will increase along with your credit utilization ratio. This could cause your credit score to drop and harm your ability to qualify for new credit. If the account holder misses a payment, it will appear on your credit report and affect your score. And if the account holder has a balance that he can’t pay and defaults completely, “it’s going to hurt your credit score and it’s going to hurt your bank account because you’ll have to pay those debts under the contract,” Griffin says.

On the plus side of things, if the account holder maintains a balance that is low relative to the credit line, it can actually lower your credit utilization ratio and raise your score. Each on-time payment also has the potential to improve the scores of each of the people involved.

If you sign a card, you must tell the cardholder that you expect them to use the card responsibly, and ask them to agree in writing to make payments on time and in full. But financial challenges can derail even the best-laid plans. That’s why Harzog offers the following advice: “Don’t sign in on a credit card unless you have a way to pay any credit, just in case things don’t go well.”

Alternatives to signing up for a credit card

If you want to help a friend or family member build credit but don’t want to take the risks associated with becoming a cosigner, here are some other options to consider:

  • Add an authorized user: If you have a good credit score and would like to help a loved one, adding them as an authorized user to your credit card account is much easier and more secure than signing their card. “An authorized user benefits from your credit history but is not liable for debt,” Griffin says. If you add an authorized user, you remain in control of the account, and you can even restrict the authorized user from charging the account by not giving them access to a credit card. You only need to continue to make payments on time on that card, and this will positively affect the credit score of the authorized user. However, be aware that not all credit card issuers will report authorized user activity, according to Harzog. Make sure your card offers this feature before proceeding.
  • Student and insurance cards: If someone can’t qualify for a regular credit card on their own, they may have better luck with a student credit card or a secured credit card. Student credit cards are aimed at young adults who have established a credit history, and usually come with more flexible credit criteria than traditional cards. Some student credit cards may require proof of enrollment in an educational institution to qualify. Secured cards require an upfront deposit that acts as a card credit. Since the deposit acts as collateral, reducing the risk of the card issuer, it is usually easier to qualify for it than traditional cards. Beginner credit cards are a great way to step in, and making consistent and on-time payments can help someone improve their credit score.
  • Credit Building Loan: Harzog suggests that a credit building loan from a local bank or credit union is another way for someone to build credit independently. Like a secured credit card, these loans require a deposit. The borrower does not get his deposit back until he pays off the loan in full, but his payments will be reported on time to the three credit bureaus to help them establish or improve their credit score. Credit cards are generally a more effective way to build credit, says Harzog. But a credit building loan can be a good alternative or addition to a credit card.


Signing a credit card to a friend or family member may seem like an easy way to help them build credit, but the risks to your money and your relationship with that person are great. Experts recommend never signing a credit card with someone – there are always better alternatives available.

professional advice

If you want to help someone build their credit without the risk of harming your account, you can add them as an authorized user to your account without giving them access to a credit card. This way, they can take advantage of your credit history but won’t be able to make purchases on your account.

If you decide to sign despite the risks, be sure to sit down with this person and write an agreement outlining how the card will be used and how and when it will be paid. If possible, apply for a credit card with them as a joint account holder rather than a cosigner. This way, you will have access to the account and you can track their spending. This will allow you to correct course before the debt balance gets out of hand.

“Sometimes saying no, my friend, is the right answer,” Griffin says. If this is the case, you can tell the person that you do not trust them – you are just following the traditional advice about the difficult decision. Suggest another way you can help, such as offering budget advice or debt repayment strategies. He suggested some alternatives for the person to build his credit score independently. Most likely, your loved one will understand – and refusing to fully sign will put less stress on your relationship than any possible financial failure with a combined credit card in the future.

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