Does Joint Credit Help Your Credit Score?

A joint credit account can become a useful tool to boost your credit rating, but often turns into a huge liability that damages your credit. The danger with opening a joint credit account is that you may have to depend on someone to handle the account responsibly. Unless you have no other way to obtain credit, you usually do better opening an individual account.

Identification

Opening a joint credit account can help your credit score if you and the other borrower always pay the monthly bill on time. Also, the account provider must report to the credit reporting bureaus. In general, only accounts that involve borrowing money appear on a report. For instance, a credit card company likely reports the account to the credit bureaus, but banks never report joint savings or checking accounts unless you have a delinquent balance.

Liability

You share the payment history on a joint credit account with the other borrower. This becomes a liability when the other borrower mishandles the account, such as maxing out the limit and not paying it back. You must repay the balance on a joint credit account under any circumstances, even when you do not use the account or the other borrower declares bankruptcy. If you cannot repay the balance on a joint credit account, your score can drop by several hundred points due to missed payments.

Benefits

If you have no credit history or a history with many negative items, cosigning on a credit account may be your only path to building a new credit history. For instance, if you recently declared bankruptcy, it may take several years before you can qualify for an unsecured line of credit at a reasonable rate. If you and a spouse want a mortgage, a joint application may lower your interest rate a few points, which means you'll save thousands of dollars over the life of the loan.

Tip

Even when you trust the joint borrower, you can never predict how the relationship may change in the future. Married couples sometimes ruin their credit rating when they go through divorce, because of disputes over who owes what portion of a bill. If you have joint accounts, separate them, especially if you anticipate a divorce. You can still share a credit account. For instance, the other borrower can become an authorized user -- someone with a card linked to the account, but no authority to change account settings -- on your credit card. A jointly held mortgage requires one borrower to refinance the account. The other borrower can provide support, such as a security deposit.