The Dangers of Co-Signing Credit Applications

by: John Ulzheimer

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 requires that people under 21 have a co-signer or a job in order to open a credit card. Further, the same law requires lenders to confirm an applicant's capacity to pay their debt for any other loan. This has thrust the prospect of co-signing for loans (or asking for someone to co-sign for you) into a new light of popularity.

When you co-sign for a loan or a credit card you are taking on equal responsibility and equal liability for the repayment of the debt. This means you are essentially responsible for payments if the loan goes delinquent. And, your credit reports will reflect the status of the account, which can include any negative credit reporting.

There's a fairly popular misconception that you can co-sign for a loan and not be liable for its repayment. This so-called "co-signer for credit only" designation doesn't exist in any legitimate lending environment and is not recognized by lenders. You either are or are not liable for payment, and when you co-sign you are definitely liable.

Notwithstanding the dangers of the debt going into default, co-signing can be problematic even if the debt's payments are always made on time. Simply being in debt is half the problem when you co-sign. Almost all lenders pull your credit reports and credit scores when you apply for credit and co-signed debts will appear on your credit reports. This means they will influence your credit scores and can cause them to be lower than if you had not co-signed.

Your debt to income ratio, the amount you owe relative to the amount you make, is also a key factor in mortgage financing. The more you owe the less attractive you're going to look to other lenders, even if all of your payments have been made on time.

There's a reason why someone has asked you to co-sign for them. They either don't make enough money to qualify for the loan on their own or their credit isn't good enough to stand on its own. Either way, you're getting involved with a co-applicant who isn't an acceptable credit risk on their own. Keep this in mind before you sign the dotted line because once you do, you've fully committed.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.

2nd Annual Youth Financial Literacy Summit

FOR IMMEDIATE RELEASE – October 10, 2011

UPCOMING NON-PROFIT EVENT PROMOTES 2^nd ANNUAL YOUTH FINANCIAL LITERACY EDUCATION SUMMIT DURING THE AFTERNOON.

North Charleston, South Carolina – The Homeownership Resource Center, a division of Family Services, Inc.’s financial literacy education programs are designed to improve the financial literacy and budgeting skills of individuals and families to help them learn how to more effectively manage their money, improve their credit and make smart spending decisions. Financial Literacy Education is particularly critical for teens and young adults. Teens that learn to budget and save their money are able make smart spending decisions and build healthy financial behaviors that will positively impact their future “We have noticed an increase in requests for financial literacy education from parents and students alike” states Carolyn Lecque, Family Services, Inc.’s Facilitator and Trainer, “it is so important that young adults learn about the value of money and how to manage their money so that they will become responsible consumers who are not at risk from financial pitfalls such as predatory lending or abusing credit cards.”

To educate and create awareness of the benefits and importance of managing money and credit to youth in the Charleston area, The Homeownership Resource Center in collaboration with Junior Achievement will host their 2^nd Annual free “Youth Financial Literacy Education” Summit on Saturday, March 10, 2012 at Charleston Southern University in North Charleston from 1:00 p.m. until 5:00 p.m. The Financial Literacy Summit will conclude with two popular Christian bands (TBD) beginning at 6:00pm. The concert is free for anyone to attend.

YOUTH FINANCIAL LITERACY EDUCTION SUMMIT DETAILS:

WHAT: Day of financial workshops for youths 13-22.
Evening of live Christian music for youths and adults (TBD)

WHEN: Saturday, March 10, 2012

Financial Literacy Education Classes 1:00 p.m. – 5:00 p.m.

Christian Rock Concert will begin at 6:00 p.m.

WHERE: Charleston Southern University, 9200 University Boulevard, North Charleston, SC 29406

WHY: Help our youth reach the peak of financial literacy and success

HOW MUCH: FREE

For additional information, to register for summit contact:

Lauren Jonas, AmeriCorps VISTA Volunteer

The Homeownership Resource Center, a division of Family Services, Inc.

Direct: 843.735.7846 Ÿ Email: ljonas@fsisc.org Ÿ Online: www.fsisc.org

MyMoneyCheckUp

National Foundation for Credit Counseling Launches MyMoneyCheckUp™

by Gail Cunningham

Comprehensive financial self-assessment tool to help consumers evaluate financial health,
make positive changes

Washington, DC – The National Foundation for Credit Counseling (NFCC) today launched a new online financial resource tool for consumers, MyMoneyCheckUp™. This free tool, available on the NFCC Web site, www.NFCC.org, or at www.MyMoneyCheckUp.org, is designed to provide an assessment of a consumer’s overall financial health and behavior in four designated areas of personal finance: budgeting and credit management, saving and investing, planning for retirement, and managing home equity.

This new tool was created to align with the U.S. Treasury’s Financial Education Core Competencies, and is an example of successful collaboration between community-based nonprofit organizations, academic institutions, and the public and private sectors.

“The NFCC is proud to bring this new financial education resource to consumers,” said Susan C. Keating, president and CEO of the NFCC. “People are eager to take control of their financial well-being, and the MyMoneyCheckUp tool is definitely the place to start.”

The tool provides customized feedback to users, allowing individuals and families to monitor and assess their financial lives, and consequently, adjust their behaviors in order to maximize their economic empowerment.

After answering a series of topic-specific questions, a personalized assessment of the individual’s overall financial health and associated behaviors is generated. With areas of concern identified, the analysis suggests changes that consumers are encouraged to implement in order to become more financially independent. The traditional red, yellow and green traffic light colors signal whether the consumer should continue on their current money path (green), proceed with caution (yellow), or stop and make a change (red). Individuals can also complete an optional budget to further help them assess their financial health.

NFCC’s implementation of this tool was made possible by a contribution from Citi Community Development.

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“Online platforms that permit underserved people to monitor their economic progress are extremely valuable in making financial empowerment sustainable,” said Natalie Abatemarco, Director of National Programs for Citi Community Development. “Citi has developed and supports similar tools in conjunction with other programs that provide access to savings and credit-building, and we will continue to work with our partners to enable people to remain actively engaged in their own economic empowerment.”

The original version of this tool – created for research purposes - was developed through the support of the Social Security Administration’s Financial Literacy Research Consortium as well as an Engagement Impact grant from The Ohio State University’s Office of University Outreach and Engagement, in partnership with the following researchers: Stephanie Moulton & Cäzilia Loibl, The Ohio State University; J. Michael Collins, University of Wisconsin, and Anya Savikhin, University of Chicago.

Although the tool is now available to any consumer on www.NFCC.org or www.MyMoneyCheckUp.org, it will also be offered through NFCC Member Agencies and partners beginning in the fourth quarter of 2011, thereby increasing awareness and participation.

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The National Foundation for Credit Counseling (NFCC), founded in 1951, is the nation’s largest and longest serving national nonprofit credit counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services. NFCC Members annually help more than three million consumers through close to 800 community-based offices nationwide. For free and affordable confidential advice through a reputable NFCC Member, call (800) 388-2227, (en Español (800) 682-9832) or visit www.nfcc.org. Visit us on Facebook: www.facebook.com/NFCCDebtAdvice, on Twitter: twitter.com/NFCCDebtAdvice, on YouTube: www.YouTube.com/NFCC09 and our blog: http://financialeducation.nfcc.org/.

HOT TOPIC! Do's and Don't for telling your spouse about debt

NFCC PRESS RELEASE

For Immediate Release

Contact:

October 3, 2011 Gail Cunningham

(202) 677-4355 - direct

(240) 672-2700 – cell

gcunningham@nfcc.org

ONE IN FOUR AMERICANS WOULD NOT INFORM SPOUSE

OF FINANCIAL DIFFICULTIES

Washington, DC – The National Foundation for Credit Counseling (NFCC) September online poll revealed that twenty-four percent of more than 1,400 respondents would not tell their spouse if experiencing financial difficulties.

Reasons given for withholding the information included the fear that it would worry the spouse (nine percent); that the spouse is unaware of the debt (eight percent); that it would damage the relationship (seven percent).

“Even if well-intentioned, withholding financial information from a spouse is not a sign of a healthy relationship, either emotional or financial,” said Gail Cunningham, spokesperson for the NFCC. “It is encouraging that the majority, 76 percent, would share the information with their spouse so that they could work together to resolve the situation.”

Even though having a discussion around money can be difficult, particularly if it is long overdue, it is a topic that ideally should be addressed early in a relationship, preferably before tying the knot. “People bring financial baggage into a relationship that they often don’t deal with until there is a problem, making it challenging to have a constructive conversation,” continued Cunningham.

To help facilitate a positive conversation about financial issues, the NFCC recommends the following Do’s and Don’ts of a successful discussion:

· Don’t approach the subject in the heat of battle. Instead, set aside a time that is convenient and non-threatening for both parties.

· Do make it a casual conversation about a serious subject, respecting the fact that each person has valid opinions and concerns.

· Do be honest about your current financial situation. If things have gone south, continuing the same lifestyle that was possible before the change in income is simply unrealistic.

· Do be open to adjusting your lifestyle. If spending cutbacks or second jobs are necessary, resist whining. It’s likely that your situation will be temporary, and you could end up regretting the pity party you hosted.

· Don’t hide income or debt. This is known as financial infidelity. Instead, bring financial documents, including a recent credit report, pay stubs, bank statements, insurance policies, debts and investments to the table.

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• Don’t point the finger of blame. That’s a real conversation stopper.

· Do probe to understand long-held financial attitudes, often present since childhood and ingrained by observing how parents addressed money issues.

· Do acknowledge that one may be a saver and one a spender, understanding that there are benefits to both mindsets and agreeing to learn from each other’s tendencies.

Once everything is out in the open, it is time to make decisions about how to handle your finances in the future:

· Do make a plan to deal with any skeletons that came out of the financial closet. Such surprises can greatly compromise your ability to obtain future credit opportunities. Now is the time to deal with them.

· Do construct a new joint budget that includes savings. Emergency situations drop into your life at the most inopportune times. Without a rainy day fund, the financial hole becomes even deeper.

· Do decide which person will be responsible for paying the monthly bills. It is likely that one person will be a good fit for this task, while the other finds it burdensome.

· Do allow each person to have independence by setting aside money to be spent at his or her discretion.

· Do decide upon short-term and long-term goals. It’s ok to have individual goals, but you should have family goals, too.

· Do talk about loaning money to family members and friends. Decide if it’s something you’re each comfortable with, or should be taboo.

· Do talk about caring for your parents as they age, and how to appropriately plan for their financial needs, if necessary.

“Court records show that financial stress is one of the main causes of divorce. Taking action now could prevent a disaster later,” commented Cunningham.

For professional assistance working through financial problems that have never been addressed, consider an appointment with a certified consumer credit counselor at an NFCC Member Agency. To be automatically connected to the Agency closest to you, dial (800) 388-2227, or to locate a counselor online go to www.DebtAdvice.org. For assistance in Spanish, dial (800) 682-9832.

The September poll question and results are as follows:

If I were experiencing financial difficulties, I

A. Would tell my spouse so that we could work together to resolve = 76%

B. Would not tell my spouse, as they have no idea about the debt = 8%

C. Would not tell my spouse, as it would worry them = 9%

D. Would not tell my spouse, as doing so would damage our relationship = 7%

Note: The NFCC’s September Financial Literacy Opinion Index was conducted via the homepage of the NFCC Web site (www.DebtAdvice.org) from September 1 - 30, 2011 and was answered by 1,430 individuals.

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The National Foundation for Credit Counseling (NFCC), founded in 1951, is the nation’s largest and longest serving national nonprofit credit counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services. NFCC Members annually help over three million consumers through close to 800 community-based offices nationwide. For free and affordable confidential advice through a reputable NFCC Member, call (800) 388-2227, (en Español (800) 682-9832) or visit www.nfcc.org. Visit us on Facebook: www.facebook.com/NFCCDebtAdvice, on Twitter: twitter.com/NFCCDebtAdvice, on YouTube: www.YouTube.com/NFCC09 and our blog: http://financialeducation.nfcc.org/.