Can You Apply For A Credit Card With A Cosigner?

Updated:Jun. 7, 2019 

mike-pearson

If you’re trying to build or repair your credit, using a cosigner can be a decent way to go about it.

Why?

Because you can use someone else’s credit score rather than your own.

What's the catch?

Most credit card companies don’t allow cosigners.

But, we have the inside scoop on the ones that do...

And everything else you need to know.

What does it mean to cosign?

A cosigner is someone who is legally obligated to repay a loan or debt in full. 

If you cosign a loan, you're hoping the person you're cosigning for will pay the loan back on their own—but if they default, you as the cosigner are on the hook for the entire amount.

Cards that allow cosigners

As we said earlier, most major credit card companies don’t allow cosigners, but there are still a few companies that will allow cosigners in 2019.

  • Bank of America allows it and has no minimum age requirements. This is a good option for high school students to start building credit early.
  • U.S. Bank allows cosigners for applicants over 16 years old. But in order to remove the cosigner, the entire account must be closed.
  • Wells Fargo allows cosigners for applicants of any age. And they too require closing an account entirely to remove it.

3 reasons you might need a cosigner

1. You're building credit from scratch

Most people need about three to six months of credit usage to have a credit history, but without a credit history, it’s almost impossible to get a loan. 

In these types of catch-22 cases, getting a cosigner might be necessary in order to start building credit.

2. Your credit score isn't high enough to secure the loan on your own

All loan and credit card companies have minimum thresholds of scores they’ll accept, so if yours falls below that range, you’ll need another option.

3. You don't meet income requirements

You might also need a cosigner if you don’t have much income or if your income doesn’t meet your lender’s requirements, which is a fairly common reason why a lot of people use cosigners.

In these cases, you might even have a decent credit score, but just like with other criteria, most lenders have an income threshold you have to meet.

You might be able to more easily get a cosigner in this situation as well since it is not necessarily indicative of how responsible you are with your payments.

The risks and benefits of cosigning

Cosigning can also affect a person’s credit score, which is the main reason many people think twice about it.

Presumably, the cosigner has a decent score since that’s what they need in order to get the loan. But if the cosignee misses payments or makes them late, those marks will show up on his cosingner’s report as well.

This loan could also weigh against a cosigner’s credit utilization ratio, which is important to keep at 30% or lower.

In the case of a cosigned credit card, this might not be the case if the cardholder uses it responsibly. But if he maxes it out, it shows up as a maxed out credit line for the cosigner too.

All that is to say that it may be harder than you think to find someone to cosign for you, even if you do find a credit card that allows it.

And it’s important that you don’t take it lightly when you do. You’re putting both your own credit and that of your cosigner’s at risk.

But on the flip side of that, if you need a boost getting started or are at a point where you know you can use credit responsibly, this can be the best option.

Just make sure you both know what you’re getting into.

To break down these risks and benefits more simply:

Risks

  • Cosigners risk their own credit. Any activity on the account shows up on their credit reports. Plus, it could decrease their credit utilization score.
  • Cosigners are legally responsible for the debt. If the borrower defaults on the loan, the cosigner will be required to pay the full amount or receive the same collection activity. 
  • Borrowers risk ruining relationships. If a borrower does do something to negatively affect the cosigner’s credit, it could put a strain on the relationship.
  • You’ll have to close the account to remove a cosigner. Every card we’ve found requires you to completely close the account in order to remove a cosigner. And since your end goal is to have a good score of your own, you will want to do that at some point.

Benefits

  • Easier qualification. Obviously, the main reason to use a cosigner is to qualify for a loan more easily. And the cosigner can feel good about making this happen.
  • Lower interest rates. For the borrower, a cosigner with better credit can help him get much lower interest rates and better terms for his loan.
  • Higher credit utilization. While this can be a negative mark if the borrower maxes out his card, it can also be positive if he uses it very little. This way, it can open up another line of credit on your profile and boost your score a few points.

Better alternatives to cosigning

As you can probably tell, getting a cosigner is usually a last-resort tactic to securing credit, as it can be hard to find someone willing to put so much on the line for you.

But luckily for you, there are plenty of better options.

Secured credit cards

A secured credit card is a good way to build or repair your own credit fairly quickly, if you choose not to work with a credit repair company

The way it works is by securing your credit line with a deposit that the bank will hold for a specified period of time. They usually have minimum and maximum deposit limits that range from $250 to $1,500, and your credit limit is equal to that amount.

Each credit card company handles cardholder’s deposits a little differently.

For example, Discover’s policy states that they will review your account monthly to determine your eligibility for an unsecured card.

But most other companies require you to use their card for six months to a year before receiving that consideration. I’ve also seen one or two that never return your deposit until you pay your account in full and close it out.

A secured credit card company will report your activity to all three credit bureaus just like any other, which means if you use it responsibly, you could boost your credit score very quickly.

Credit builder loans

Credit builder loans are another great way to build your credit. 

These loans are designed specifically for that reason and are most often offered at private banking institutions, such as credit unions or local banks.   

The way it works is that a bank “loans” you the money but you actually don’t get it up front. Instead, they put it in a savings account for you and you make payments to the bank for the amount they provided.

You can’t actually access the chunk of change that’s in this account until you’ve made all the payments. It’s sort of like a layaway plan for money.

There are several benefits of credit builder loans that might make perfect sense for your situation.

For one thing, because the money is secured, it’s an easier loan to qualify for. Of course, this is only beneficial if you’re using it to build your credit, not if you actually need a loan for a purchase.

For another thing, the interest rates on these loans are usually lower than secured credit cards or any bad credit loans you might qualify for with a low score.

And thirdly, it’s a good option for people who have trouble saving money.

Since you can’t touch the loan until it’s paid for, you have no choice but to continue saving it. And you could end up with a good-sized amount of money in the end that will be useful for a down payment on a car, a home, or another big purchase you’ve been waiting to make.

Authorized users

Becoming an authorized user is probably the lowest-risk tactic available for building your credit. 

Rather than convincing someone to cosign your loan, you can ask them to put you on their account as an authorized user. When they do that, their credit activity for their card is reported on your credit report just like it is on theirs.

Of course, you’ll need to make sure the person you ask is responsible with their credit.

It’s also sometimes much easier to convince someone to do this than to cosign a loan for you because they don’t have to actually give you access to their card.

In other words, they can add you as an authorized user without giving you their account numbers or information. And most companies don’t allow authorized users to make changes to the cardholders’ accounts or access the same benefits, so it can be a relatively safe exchange.

If they do trust you enough to go ahead and let you carry a card, however, this can benefit them in some ways as well.

Mainly, if they have a points card, you can help them rack up points. Not to mention, you could offer to help with the payments.

Final thoughts

Asking someone to cosign for a credit card probably isn’t necessary since you have other much better options, and the companies that allow it are few and far between.

But if you do decide this is the best option for you, make sure you treat it responsibly.

And as soon as you’re credit score is in the range you want it, try applying for a card on your own.

About the Author


Mike Pearson

Mike is a recognized credit expert and founder of Credit Takeoff. His credit advice has been featured in Investopedia, CreditCards.com, Bankrate, Huffpost, The Simple Dollar, Reader's Digest, LendingTree, and Quickbooks. Read more.

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