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A credit card cosigner is responsible for paying off the debts of another person if they fail to make payments. This system allows individuals with poor credit to establish or improve their credit rating, but finding a cosigner can be difficult due to the high risk and liability involved.
A credit card cosigner is a person who accepts responsibility for credit card debts that another person incurs if that other person fails to make the required payments. When a credit card cosigner attaches her name to another person’s credit card, that person effectively accepts responsibility for all debts accumulated on that card. If the actual cardholder fails to make payments, the cosigner is obligated to honor those payments. The contract a cosigner agrees to makes them as liable for debts as the cardholder, and can subject them to the same penalties, including additional fees, legal action, and credit report damage, if they are not performed. the payments.
The purpose of using a credit card cosigner is to protect the issuing bank from losing money when it issues credit cards to people who have no or poor credit. This system can give an individual who might not normally have a credit card the opportunity to establish or improve their credit rating. People getting their first credit card often use a credit card cosigner so they can start building good credit and can eventually get a loan or credit card without a cosigner.
When a bank is considering a credit card cosigner, it will apply the same rules as if the cosigner applied for the card directly. The bank analyzes income, credit history and current debts, determining the ability to pay. If the cosigner qualifies, then that person can sign or guarantee the credit card on behalf of the cardholder. If the cosigner does not qualify, the credit card will most likely not be issued.
It can be difficult to find a credit card cosigner due to the high amount of risk and liability involved in the contract. The cosigner will need to have great confidence in the cardholder and the resources available to cover unpaid debts, which is necessary to preserve their own credit rating. A close personal friend or family member is often the best choice for finding a cosigner, although anyone who qualifies can be a credit card cosigner. In some cases, such as on college campuses, this has led to a practice where some students with good credit will charge a fee to become a cosigner for a student who does not yet have established credit.
Smart Asset.
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