What Is a Cosigner?
Key points about: credit card cosigners
A cosigner on a credit card could help the main borrower access credit.
A cosigner takes responsibility for paying back a loan if the primary borrower doesn’t pay the debt.
Most major credit card issuers don’t allow cosigners but do allow adding an authorized user to an account.
If you’re applying for a credit card for the first time or trying to rebuild your credit, you may have difficulty being approved. But, with a consigner, some borrowers may have a better chance of being approved for a credit card.
Though cosigning may be more common for a loan, like a personal loan or auto loan, than a credit card, it can be helpful to understand what a cosigner is and how you can access credit if your credit card issuer doesn’t allow cosigners.
What’s a cosigner on a credit card?
Sometimes a credit applicant, or the main borrower, isn’t approved for a credit card. In this situation, a cosigner on the credit card acts as a guarantor to minimize the risk for the credit card company. If the main borrower doesn’t pay, the cosigner is obligated to pay any missed payments or even the total amount of the loan.
According to the Consumer Financial Protection Bureau, a cosigner takes full responsibility for paying back a loan if the primary borrower doesn’t pay their bills according to the loan agreement.
A cosigner is usually a family member or friend that has demonstrated responsible credit use on their credit report and has a stable income, according to the Federal Trade Commission. For example, a creditworthy cosigner may have good credit, makes their monthly payment on time, and doesn’t show a missed payment on their credit report.
Benefits of a cosigner
There are a few benefits of having a cosigner on a credit card.
Better chance of approval
According to Experian, one advantage to having a cosigner is that it may improve your chances of getting approved for a credit card or loan. That’s because, typically, a cosigner has a steady income and a good credit score and takes responsibility for paying your credit card debt if you default. The cosigner’s credit score should probably be very good or excellent.
More favorable credit card terms
Because the cosigner has established credit and income, it could also mean the main borrower gets more favorable terms, like a lower interest rate or a card with rewards like cash back.
Build credit history
Getting a credit card could allow someone with no credit to build their credit history or someone with poor credit to improve their credit score, especially by using the card responsibly.
Disadvantages of being a cosigner
While the primary borrower is responsible for making credit card payments, there are a few risks to consider before becoming a cosigner on a credit card.
If the borrower makes a late payment or fails to make payments, the cosigner is responsible for the outstanding balance. A late payment or missed payment could impact their credit score if the credit card issuer reports the delinquency to a credit bureau.
The cosigner may have difficulty getting a new line of credit because a lender may think the cosigner’s debt level is too high, according to The Federal Trade Commission (FTC). And if the cosigner wishes to remove themselves from the account, it could be difficult, the FTC goes on to explain.
How to get a credit card without a cosigner
Most major credit card issuers don’t allow cosigners since cosigning is more common for loans like a personal loan, student loan, mortgage loan, or car loan. But, if you’re having trouble getting a credit card on your own due to poor credit or no credit history, you can consider a few other options.
Become an authorized user
One way you can access credit and start to build credit history or rebuild credit history is as an authorized user on someone else’s credit card account. Being an authorized user can help you build credit history, according to Experian. Authorized users get their own credit card with their name on it, but the primary account holder is responsible for the bill.
Get a secured credit card
Secured cards can help you build or rebuild your credit when used responsibly.
Apply for a student credit card
If you’re a student and meet the credit card company’s criteria, you could apply and be approved for a student card. Some student credit cards don’t require a credit score to apply, so you’re more likely to qualify even with no credit history.
Although cosigners for credit cards aren’t common, there are still a few ways to access credit if you have a limited or no credit history. Some risks are involved in becoming a cosigner on a credit card, but it could also help the primary borrower gain access to credit or more favorable credit card terms. If you’re having trouble accessing credit, rather than finding a cosigner, you may consider becoming an authorized user on someone else’s credit account or opening a student or secured credit card.
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