11. You Co-Sign on Debt
Co-signing for family or friends on their credit cards, car loans, residential leases and cellphone plans can be a quick way to ruin strong credit scores, said Ian Atkins, general manager at Fit Small Business.
“This can impact you negatively in two ways,” Atkins said. “First, that debt obligation can immediately show up on your credit report, and the higher debt load can impact your credit score. Second, if your friend or family member doesn’t make their payments, those missed payments will show up on your credit report. If the account eventually goes to collections, that too will show up on your credit report.”
How to avoid it: “You should be very careful when co-signing for friends or family,” said Atkins. If you do co-sign, make sure you can cover the monthly payments if necessary, he said. Also, closely monitor the account to make sure no missed payments occur.
How to fix it: If you co-signed on another borrower’s debt and it’s having a negative impact on your credit, try to get the other person to refinance the debt in their name only. If that’s not an option, you might need to suck it up and take over the payments. It’s a painful lesson, but you won’t soon forget why, in most cases, you should never co-sign on debt.
