Home > Personal Finance > 25 & Employed, But Your Bank Still Treats You Like a Kid

Comments 0 Comments
Advertiser Disclosure


About two-thirds of millennials have asked someone to co-sign a loan or lease — unsurprisingly, they’re looking to Mom and Dad when they need the help, according to a recent survey by Experian Consumer Services.

Co-signers are necessary if a consumer wants a loan (or to rent an apartment) but cannot get approval on their own. The co-signer guarantees that payment obligations will be met, and if they aren’t, the co-signer will be held accountable. In short: If the primary borrower screws up, the co-signer’s credit suffers.

The survey results were drawn from interviews conducted with 1,000 Americans between ages 18 and 30 from Jan. 24 and Jan. 31. The margin of error is plus or minus 3.1%.

Of the two-thirds of respondents who have needed a co-signer, the most common reason (35%) was to take out education loans, and residential leases were a close second at 32%. Millennials also used co-signers to get car loans (19%), credit cards (17%), car leases (11%) and mortgages (6%).

Consumers should be extremely careful when considering co-signing a loan; the other person’s behavior can adversely affect your credit standing, and it can take a while to recover from credit damage.

The survey shows a bit of good news: Of the millennials who have taken out co-signed loans, only 8% reported having delinquent or defaulted co-signed accounts.

It may be a small percentage, but that’s probably no comfort to the co-signers on those loans.

Not all those co-signers saw their credit scores drop, but they were affected in one way or another: 32% of the co-signers made payments when the borrower could not and 7% took on the debt when the borrower defaulted. Twelve percent reported credit score damage. Even if the borrower handles the account responsibly, the co-signer needs to consider how else the extra loan could impact his or her credit: The extra account may elevate your credit utilization rate and increase your debt obligations. Co-signing a loan will also result in a hard inquiry on your credit report, too, so that could hurt your credit score or chances of getting a different loan in the short term. (If you want to see how a co-signed account is affecting your credit, you can get two of your credit scores for free on Credit.com, plus a personalized plan for building or maintaining good credit.)

It’s understandable parents want to help their kids get started financially, but there are ways to help a young adult build credit without risking your own credit standing. A student credit card or secured card may be easily accessible for those starting out, and parents can also add their kids as authorized users on their credit cards. There’s always the risk that the authorized user may run up a large credit card bill, but that won’t be as damaging as a delinquency on a co-signed account.

Either way, whenever there’s shared responsibility for credit, communication must be a top priority —17% of millennial borrowers reported that their co-signers didn’t learn about their repayment issues right away.

More on Credit Reports and Credit Scores:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team