Dear Penny: Should I Co-Sign a Credit Card to Repair My Son’s Awful Credit?

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Dear Penny,

My son has bad credit because he fell behind on bills after losing his job. He had two accounts closed but paid off the balances. Now he can’t get accepted for any sort of credit.

He’s 26 now and is working again while living at home with me. But since he doesn’t have credit, I’m worried that he’ll never be able to get established on his own.

I’m thinking of offering to co-sign a credit card for him so that he can rebuild his credit. What do you think, Penny? Is this a good idea?

-Meddling Mom?

Dear M.,

I suppose that somewhere out there, someone has co-signed and doesn’t regret it. But they’ve never written to me.

Instead, I hear from people like the woman whose credit score fell 100 points after she co-signed a friend’s car loan and the car was repossessed, or the mother who worries that co-signing her daughter’s student loan killed her retirement plans. Those are just the letters I’ve published. Every time I answer a question on co-signing, my inbox fills up with co-signing regrets.

Banks make tons of money by issuing people credit cards and charging them exorbitant interest rates. When a bank looks at someone’s credit profile and rejects them, they’re saying: “Nah. We’ll pass on the potential to make money because it’s too big of a risk.” That’s a pretty good reason not to jeopardize your personal credit or finances, either.

But you may not have a choice on this one. Most major credit card companies no longer allow co-signers because the risk of issuing cards to people who can’t qualify on their own record isn’t worth it to them. Should you ignore my advice, you may have better luck with a community bank or credit union.

The best advice I can offer your son and anyone else who’s trying to rebuild credit is to open a secured credit card. You put down a refundable deposit that becomes your line of credit. Because there’s little risk to the issuer, it’s easy to get approved for one. Usually, if you make your payments on time for about a year, you can get approved for a regular credit card.

But here’s what I’m curious about: Has your son even asked you for help? Your signature certainly implies otherwise.

From what you’ve told me, I’m concerned that your son lacks the drive to rebuild his credit. If he isn’t motivated to fix his finances, what else isn’t he motivated to do?

I suspect that’s the heart of your concern. Are you worried that your son will still be a boomerang kid when he’s 36 or 46?

I wish I knew more about your son’s work and living situation. It’s great that he’s working again, but is he working toward anything? If he’s saving money and contributing to household expenses, that’s a lot different than if he spends his whole paycheck on gaming equipment and UberEats.

The long-overdue discussion you need to have with your son is about much more than credit. You’re no doubt cutting him a break by allowing him to live with you. Does your generosity have a shelf life?

Set some expectations. That doesn’t mean you have to give him a firm moveout date, but you should have some conditions for continuing this arrangement. Many people won’t make changes when they feel too comfortable.

But if you make it clear that you expect him to help out with bills and that you’re not going to allow him to live with you forever, perhaps you’ll inspire him to start thinking longer-term.

Credit can certainly be part of this conversation. When your son leaves the nest again, he’ll find life a lot easier if he’s improved his credit.

Ultimately, though, he’ll need to be the one to make this happen. It’s time for him to act like the adult that he is.

If your son isn’t willing to make any changes, you’ll have to put more pressure on him. That may mean setting a hard deadline for moving out and sticking to it. This will be uncomfortable for both of you.

Resist the urge to play savior here. If your son doesn’t clean up his credit, maybe that means he’ll pay a huge security deposit to move into an apartment or have to live with roommates for a while. Maybe he’ll learn that life without credit is tough and finally make changes.

If you make life too easy for him, your fears will come true and he’ll never re-establish himself.

Some people insist on learning things the hard way. Hopefully, your son isn’t one of them.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. Send your tricky money questions to [email protected].