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Shared Financial Accounts

How Shared Accounts Affect Your Credit Score.

Article By : Patrick Mansfield | U.S. Gov Connect
New Credit Report Rules

Reasons to Co-Sign on an Account

1. To Get Approved: 
In some instances, an individual may not be approved for a loan that they need without co-signing with someone else. This could be because that person has no credit history or does not have sufficient income.

2. To Share a Debt Burden: 
Many people share joint credit accounts, quite simply, because they are sharing a debt. This could apply to installment debts like a mortgage or some other kind of big purchase. It makes sense for both people to sign for the loan because they are both responsible for it.

3. To Improve or Rebuild Credit: 
Finally, it may be in a person's best interest to sign on with someone else to improve their score. We will discuss this more now.

How Does Sharing an Account Affect My Credit Score?

Sharing joint credit accounts can be a great move for your credit score, or it can be a horrible decision. If the individual you are co-signing with is reliable and has an excellent credit history, then co-signing may be a great decision for you (especially if you aren't paying the loan).

This is what co-signing with such an individual would produce:
  • More good payment history
  • More open accounts in good standing that the credit bureaus can see
  • Lowers your debt utility and increases your credit limits (in some cases)
Putting those things together, co-signing can help you accrue more positive credit history at a faster pace on larger accounts than going it alone. For instance, a child's parents could let them co-sign on the mortgage and (so long as the parents made the monthly payments on time, every time), that child would begin to develop great history before he or she ever needed access to credit.

Of course, co-signing isn't all roses and flowers. In fact, it can be incredibly dangerous for your credit. For one thing, you could be left with the entirety of the debt if your other co-signer became unable to pay their end, which would leave you in a tight financial bind.

If that were to happen, you may find that it is impossible to pay the debts in full and on time, which would destroy your FICO score.

Conclusion: Is Co-Signing Good or Bad?

After reading this article, you may still be asking yourself about whether or not co-signing is "good" or "bad". The truth is that the answer to that question depends entirely on your personal situation and goals, the personal situation and goals of any other potential co-signers, and other factors. 
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