Before You Share Credit Accounts With Parents: Essential Risks and Warnings
Co-signing credit accounts with parents can lead to severe financial consequences, as demonstrated by TV personality Teresa Strasser's experience. After co-signing her father's mortgage that went into foreclosure, her credit was severely damaged despite her personal history of timely payments.
According to Experian, 18.7% of credit cards are shared with family members through joint accounts, authorized users, or co-signers. Before helping parents with credit accounts, consider these crucial factors:
Risks of Sharing Credit Accounts:
- You become responsible for all debt incurred
- Late payments affect both parties' credit scores
- Collection accounts can prevent future loan approvals
- High credit utilization impacts borrowing capabilities
If You Must Share a Credit Card:
- Choose a card with a low credit limit
- Become the primary account holder
- Add parent as an authorized user
- Set up spending alerts
- Monitor transactions weekly
- Keep track of all payments
- Maintain ability to remove authorized users
Better Alternatives to Help Parents:
- Discuss their financial situation openly
- Connect them with credit counselors
- Consider bankruptcy attorney consultation
- Pay directly for specific needs (utilities, phone, car)
- Help secure a secured credit card with cash deposit
- Assist with budgeting and financial planning
Identity Theft Warning: Some parents may resort to using their children's Social Security numbers for credit applications when facing financial difficulties. If this occurs, victims must report fraud to remove unauthorized accounts, which could result in legal consequences for the parent.
Protecting Family Relationships: While financial issues can strain family bonds, focus on maintaining relationships through open communication and finding alternative ways to support parents without compromising your financial future.
Remember, the best protection is avoiding shared credit accounts altogether. If assistance is necessary, explore options that don't put your credit history at risk.