When you are considering co-signing on a loan for someone, you need to be very careful. We all

would like to help out family members and friends, but at the same time need to be smart about it. In a lot of cases, folks need a co-signer because they have not handled their credit responsibly and with care. Some people do not make it their priority to make their payments on time.

You must understand when co-signing that you are as responsible as the applicant. The debt shows up on your credit report as well and if the payment is not made on time, the lender will look to you for payment. As the responsible co-signer, who has always fulfilled your obligations, this is the last thing that you want to happen unless you are prepared to make that payment. Otherwise, your good credit will be blemished and you may not be aware of it until it's too late.

Another thing to keep in mind is that when you go to apply for your own credit, you could be denied since the loan that you co-signed for is on your credit report and will be calculated on your debt ratio. That debt could put you over the top!

If you decide to co-sign for your child or a young person who has yet had the opportunity to establish credit, be sure that they understand the importance of making timely payments. As a lender, when I extend credit to a young person for the first time I give them what I call the Mommy talk. Another good way to help a young person establish credit is to let them borrow against your certificate of deposit. Make it small and let them make the monthly payments. That way, they get the loan and you do not have to co-sign.

The bottom line is, while it may feel good to help someone in need, never do it at the expense of jeopardizing you own hard earned credit rating. Also, be sure that the loan is for a necessity and not something frivolous. Work with the lender so that if the loan gets 10 days past due, you will receive the past due notice as well. And finally, if you have a bad feeling about co-signing for someone, follow that feeling and don't do it!