We're serious when we tell people to avoid co-signing on someone else's credit card or loan. The risk isn't worth the reward. There are easier ways to help someone build their credit (authorized user account, private loan for a downpayment).
Still considering co-signing for a relative or friend? You wont after you hear this true co-signer horror story from Lee:
The credit card company went to court and received a judgment against my friend and me. Since they seem to not be able to get any assets or anything else from my so called friend, they are now trying to attach my assets. I cannot seem to be able to contact my so called friend anymore. I wonder why. Do not even know if he even has a job anymore.
Just to let you know for informational purposes the judgment including interest and court fees is around $10,000.00.
Yikes! Co-signing often doesn't turn out well, but this is a rare case where it has turned out pretty much as bad as possible. Lee agreed to be legally responsible for the debt when she co-signed for her friend. It isn't fair, but she's on the hook for repaying the amount that he charged up.
And, as a special bonus, her credit score is now damaged severely for the next 7 years. A court judgment is as bad for your credit score as a foreclosure or bankruptcy.
Friends don't let friends co-sign.
Emily Peters – Credit.com's personal finance expert and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.