Sunday, September 7, 2008

Don't Cosign Your Child's Loan-Do This Instead

Parents often cosign credit cards or other loans for their children. But you should be aware that in many states, creditors are not required to notify the cosigners when a borrower exceeds a credit limit or falls behind on loan payments. As a reult, you can become liable for overdue payments and penalties without ever knowing there was a problem. And your credit rating may be harmed as well.

Here's a better way: Consider having the child cosign your credit card. That way, the child will have access to the credit line and build a credit history, while monthly statements will come directly to you.