This just in: No good deed goes unpunished.
“If you co-sign with someone on a loan or a credit card, you’ve got a 40 percent chance of losing money and a 26 percent chance of damaging your relationship,” said Matt Schultz, senior industry analyst at CreditCards.com. It commissioned a survey of 2,003 adults of whom 388 had co-signed a loan.
The conclusion: Never help anyone ever.
“Twenty-eight percent experienced a drop in their credit score because the other person paid late or not at all,” Schultz said.
That drop in credit score can cost a co-signer for decades, worsening the terms of everything from car loans to mortgages.
Jill Schlesinger, a CBS News business analyst and certified financial planner, said that perhaps it’s OK to help people out in certain circumstances.
“Your child, who has a very good job but doesn’t have enough credit history to purchase, say, an apartment? OK, I can live with that,” she said.
Co-signers might be wise to take a trust-but-verify approach, demanding to have access to all relevant accounts so they can monitor the finances of the person they’re supporting.
In general, Schlesinger said, “If someone cannot get a loan, usually there’s some reason behind it. If a lender isn’t willing to extend money, why should you?”
Ultimately, don’t offer to help someone get a loan unless you’re willing to pay that loan back yourself.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?