Image: Signing document © Vincent Hazat, PhotoAlto, Getty Images

It sounds harmless.

Just sign your name, and a friend or relative will get a much-needed credit card. Like most things in life, however, being a co-signer is not that simple.

Financially, "co-signing is probably the worst thing you can do," says John Ulzheimer, the president of consumer education for SmartCredit.com.

Judging by the complaints and lawsuits made by co-signers, it also seems to be one of the least-understood arrangements, he says. When friends and relatives co-sign, they often don't realize the new credit card debt is also theirs -- 100%.

Often, the potential co-signer has a relationship with the wannabe account holder. That, too, can be jeopardized, says Ulzheimer.

With the potential for complications, personal and financial, "there are too many downsides," he says.

Even good character is no guarantee, says Todd Mark, vice president of education for Consumer Credit Counseling Service of Greater Dallas. Especially lately, his group has seen plenty of people with fine character who have had to default, he says. That can leave co-signers holding the bag.

"It's not worth risking your own financial security," he says.

Is someone asking you to co-sign for a credit card? Here are five things you need to know before you decide.

1. The bill is yours

When you sign that credit card contract, you're saying, "If anything goes wrong, I'll pay the balance. All of it. Plus interest and penalty fees."

You're not acting as a reference. You're not "loaning out" your good credit. You're not promising to tell bill collectors where to find the account holder. You're not offering to split the bill or help the account holder catch up if he or she falls behind.

You, (the person with good credit) are promising to pay the entire bill because the lender doesn't think the applicant is quite up to the task, says Ulzheimer. The lender has seen the applicant's credit report and financial information.

Ask why the individual needs a co-signer, he says.

  • If his credit is bad, that means he doesn't have a good record with past debts. That's not a good sign for you.
  • If her income isn't high enough to qualify, that tells you upfront that she probably doesn't have enough money to meet current bills plus this new one, Ulzheimer says.
  • Younger than 21? Students aren't barred from getting cards, he says. They simply can't get them if they don't have the income to pay the bills.

2. Lenders will count this debt as yours

Are you planning to buy a home, refinance a mortgage or take out a loan for a large purchase such as a car or medical care? Lenders will look at your debt load - including the co-signed account.

"That account will impact your score no differently than if you were the only person on that account," says Barry Paperno, consumer affairs manager with myFICO.com. As far as creditors and potential creditors are concerned, "it is your account," he says.

Every consumer can handle only so much debt. If the co-signed card pushes you into the danger zone in the eyes of your creditors, you risk paying higher rates on your own credit cards, higher rates on future loans and even being denied credit or having your credit lines cut.

A co-signed card also has the potential to drop your credit score, says Ulzheimer.

That's because credit-scoring formulas look at how much available credit you have and how much of it you use each month. The less you use, the better, he says.

Even if your account holder pays the bill on time every month, if that person is using a chunk of the available credit, it could lower your score, says Ulzheimer.

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