The East Vally Tribune published a very informative article yesterday on the top five credit (and debt) misconceptions. According to the EVT (citing Transunion), the top five credit misconceptions are:
- Co-signing a loan doesn’t make you responsible for the account.
- Paying off a negative record will get it removed from your credit report.
- Paying off a debt will make your credit score jump 50 points right away.
- Checking your credit reports will lower your credit score.
- Closing old accounts will improve your credit score.
The co-signing part is the most controversial of the five becuase it oftentimes involves people you love and know. I talk to so many people who have co-signed for their brother, sister, son, daughter and sometimes friends. I know a level of compassion determines who you will co-sign for, but you need to be prudent.Â
I suggest you do a type of credit check on your own. If the relative asking you to co-sign has had some serious money management problems in the past then you may want to stay away. However, if this is a one time situation where the person is in a jam, then you can consider doing something. This doesn’t mean there aren’t other ways of helping them besides co-signing. I suggest looking into other avenues. It’s good to help, but you must be prudent.