Collegiate conniving: Students risk credit by co-signing for pals

credit card showing MasterCard logoOh, those zany college students! According to the Denver Post, some enterprising undergrads are making an end-run around CARD Act rules meant to protect them from being victimized by credit card companies.

The rules state that a person under 21 years old who doesn't have any income to show on a card application must get a co-signer. Normally, this means hitting up mom and dad. But if the parents say no, or if they have poor credit, students are turning to slightly older friends to co-sign for them. It's a high-stakes -- albeit legal -- version of underclassmen hitting up their older classmates to buy them alcohol.

The trend is real and very risky, said Adam Levin, chairman and co-founder of Credit.com. "I've heard of it," he told WalletPop in a phone interview. "There's a huge danger for the young person who's co-signing for another young person." While adding another person as an authorized user can be undone with a simple phone call, co-signing for a card with someone means they have as many rights as you do under the law, even if your credit is pristine and theirs is in the gutter.

Levin says students who are helping their friends skirt the intentions of the CARD Act by co-signing for them could have their credit trashed or be forced to pay for their pal's late-night pizza runs or MP3 collection paid for with the jointly owned card. "You run the risk of being their fairy godmother or godfather," he cautions. "You're on the hook for those debts. You're responsible."

Parents, it's important to let your kids know that, just as with drinking or recreational drug use, they might face peer pressure in college to share their good credit and run the risk of ruining that asset for up to seven years. Students, if you're hit up by a buddy who claims he or she can't get a card any other way, don't give in. Suggest they save up deposit money for a secured credit card, which will help them build their credit without damaging yours, or get a part-time job, which will make it easier for them to get a conventional credit card. College is supposed to be a time of self-discovery, but there's nothing to be gained from discovering that a spendthrift friend has shredded your credit and left you to pick up the pieces.

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