My son has bad credit because he relapsed on bills after losing his job. He had closed two accounts but paid the balance. Now it can no longer be accepted for credit.
He is 26 now and is back to work while living at home with me. But since he has no credit, I worry that he will never be able to establish himself.
I am considering offering him a co-signature on a credit card so that he can build up his balance. What do you think penny Is this a good idea?
– Interfere with mother?
I suppose someone co-signed somewhere out there and doesn't regret it. But they never wrote to me.
Instead, I hear from the likes of the woman whose credit rating dropped 100 points after co-signing a friend's car loan and taking back the car, or the mother who fears co-borrowing her daughter's student loan killed her retirement plan. These are just the letters that I have published. Every time I answer a co-signing question, my inbox fills with regret about co-signing.
Banks make a ton of money by issuing credit cards and charging them exorbitant interest rates. When a bank reviews a person's credit profile and rejects them, they say, "No. We're going to pass the money-making potential because it's too risky." This is also a good reason not to jeopardize your personal credit or finances .
But you may not have a choice. Most major credit card companies no longer allow co-signers because they do not take the risk of issuing cards to people who cannot qualify for their own records. If you ignore my advice, you may have better luck with a community bank or credit union.
The best advice I can give to your son and anyone else trying to get credit back is to open a secured credit card. You pay a refundable deposit that becomes your line of credit. Since there is little risk to the issuer, it is easy to get approval for an issuer. If you've got your payments on time for about a year, you can usually get approval for a regular credit card.
But I'm curious: did your son ask you for help at all? Your signature certainly implies something else.
From what you've told me, I am concerned that your son may lack the drive to rebuild his bankroll. If he's not motivated to fix his finances, what else isn't he motivated to do?
I suspect that is at the heart of your concern. Are you worried that your son will still be a boomerang kid when he is 36 or 46?
I wish I knew more about your son's work and life situation. It's great that he's back to work, but is he working towards something? Saving money and contributing to household expenses is very different from spending his entire paycheck on gaming machines and UberEats.
The long overdue discussion you must have with your son is about a lot more than just credit. You are undoubtedly giving 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 move-out date, but you should have some terms and conditions in order to continue this agreement. Many people will not make changes if they are too comfortable.
But if you make it clear that you expect him to help with bills, and that you won't allow him to live with you forever, you may find inspiration in the longer term.
Credit can certainly be part of this conversation. When your son leaves the nest, his life will be much easier if he improves his credit score.
Ultimately, however, he has to be the one who makes this possible. It is time for him to act like the adult he is.
If your son is unwilling to make changes, you need to put more pressure on him. That can mean setting a tough 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 balance, it may mean he is putting a large security deposit to move into an apartment or to live with roommates for a while. Maybe he learns that life is difficult without credit and eventually makes changes.
If you make life too easy for him, your fears will come true and he will 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 senior editor at The Penny Hoarder. Send your tricky money questions to [Email protected].
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