Oftentimes, credit companies, regardless of the student's little or no credit history, as well as their early years, are willing to issue them a credit card. Such a behavior is at evident variance with the common rule that credit cards are only accessible to those of age. But it doesn't change things - we already know of instances when a plastic becomes easily obtainable to 16-year-old students if their parents agree to cosign them.
Cautious parents, who do not want to expose their credit standing to risk through cosigning, opt to have their child get a student credit card or open up a pre-paid account for them themselves.
But, a regular student credit card can sometimes be out of reach - which depends on the company's requirements - and when not, you run the danger of unmanageable credit card debt and spoiled financial future. A prepaid card is essentially debit and you cannot have all the benefits of a standard credit card.
So, when a parent wants to give the student a real credit card, the parent agrees to cosign it.
But such parents should be aware of all the liability they will incur once the student fails to pay on the card. Thus, a parent is expected to trust his child implicitly, should a question of cosigning ever arise.
There are lots of horror stories circulating among credit customers, telling of irresponsible and uncooperative students, who racked up gross debt and refused to pay it, thus leaving parents facing financial crash. This is the darker side of cosigning a credit card for a student, and if you are thinking to acquire full responsibility to help your child establish credit, the following information is for your close consideration.
First, before resolving to have your credit report affected by the student's spending habits, consult a specialist and learn everything about credit card cosigner's rights and liabilities.
Let's assume that after being warned about the horrible consequences of co-signing, you are still firm about your decision. What steps should you take to stay on the safe side?
- Ask the credit company to send you duplicate statements to keep you informed about your child's credit standing;
- Try to get access to the account online;
- Ask that the creditor contacts you in case of a delay in paying the bill or exceeding the credit limit;
- If the student has come up with a balance that even you cannot clear, get your name off the credit card agreement. Do it because you want to protect your credit report from negative records but not because you are going to leave your child alone face to face with the debt. You can always help him/her with cash to ensure the on time minimum credit payment to the bank.
The last point has always been the hardest to realize. Now it is all the matter of moral responsibility and if your child is decently brought up, he/she will either let your name off the agreement or bend over backwards to guard your credit reputation from being spoiled.
When it comes to co-signing, no matter whom - your child or a good friend - the vital thing is to trust each other and be a responsible and decent person.
Thus, you will not only help your dearest to establish strong credit but will also preserve cordial, close relationship.