3 On Your Side: Students Find Ways Around Credit Laws
PHILADELPHIA (CBS) -- Sweeping reforms to the banking industry have made it much tougher for college students to get their own credit cards. But parents listen up! Teens are finding ways to get around the new laws.
Molly Heilny is frustrated. The 20-year old college sophomore can't get a credit card. She says, "They're never going to get me one." That's because when the federal credit CARD Act went into effect, it restricted anyone under 21 from getting a credit card unless they have someone over 21 co-sign for it, or they can prove they have a source of income.
John Ulzheimer of credit.com says, "The hypothesis behind that provision of the CARD Act was to make sure that consumers who are under 21 who are generally in school, do not have high paying jobs did not get into an excessive amount of credit card debt."
But experts say that some college students are finding loopholes and creating ways to get around this.
According to Ulzheimer, "One of the ways that we've seen college kids do this and it's actually quite clever, is they're actually finding classmates who are in fact over 21 and do qualify under the CARD Act rules to cosign for them."
One web advice column even fielded a question from an "over 21 year old" student asking if he should start charging students to co-sign, thinking he'd make money doing it.
Gerri Detweiler, author of "The Ultimate Credit Handbook" says, "It's very possible that a whole industry could spring around consumers willing to sell or rent out their good credit to younger students who are having trouble establishing credit for the first time."
It's important to remember that when you co-sign for someone, you are taking on the legal liability for that debt. So if the person you co-sign for can't or doesn't pay, you're going to be the one getting the calls from the debt collectors. In addition, it could have a negative effect on your credit report and credit score for years to come.
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Reported By Jim Donovan, CBS 3
