If you have no credit or bad credit, being a co-signer on a credit card -- along with a primary signer with good credit -- can help build your credit score if the credit card payments are made regularly and on time. Because someone with good credit is the primary holder of the credit card, you may even get the benefit of a lower interest rate too. Of course, being a co-signer is never without risk.
How It Works
When you co-sign a credit card with a person, you agree to take on his debt. You both have equal responsibility for the credit card debt on paper, even if he will be the one making the purchases and the payment. Should he fail to pay, you need to make the payments. But if he does pay, you both see an improvement in your credit history and score.
What to Look For
Co-signing for a credit card will not help your credit score unless the company that issues the card reports to the three major credit reporting agencies. Some cards, particularly secured cards or prepaid cards, are not reported. Those cards also usually do not require a co-signer. Not all banks or credit cards allow co-signers. According to Bankrate.com, some credit cards will let you know if you need a co-signer after you submit the application.
Co-signing can damage your score if the other person does not pay the debt. If your score goes down because you co-signed on a credit card and the other person does not pay, you may not be able to get a loan when you need it. Collection agencies have the right to come after you as well. If the other party is irresponsible about the debt and causes further damage to your credit score, your personal relationship might be permanently damaged, too.
To make sure co-signing actually improves, instead of harms, your credit score, it's best to take precautions. Only use the credit card if you know for certain that you can repay the amount before it is due. Using only about 10 percent of your limit each month may effectively raise your credit score. Your score depends on how much available credit you have each month. The less of it you use, the better your score.
Based in Pennsylvania, Emily Weller has been writing professionally since 2007, when she began writing theater reviews Off-Off Broadway productions. Since then, she has written for TheNest, ModernMom and Rhode Island Home and Design magazine, among others. Weller attended CUNY/Brooklyn college and Temple University.