Great question! This can be answered easily using a couple of scenarios. Let’s use the example of Tom and Jane. Tom goes to Old Navy and opens up a credit card. When he fills out the application, he uses only his name and credit history to apply. He later decides that for convenience, he’d like to allow Jane to use his card, so he calls up Old Navy (or the credit card company that operates the Old Navy card) and adds her as an authorized user. She now has legal rights to use the card, but no legal obligation to pay any of the debts back. Also, which can be seen as a bonus, the credit card will be reported on her credit report as an authorized user, as well as Tom’s; so if he pays the bill on time, she gets the perks of the good standing credit score without the legal obligation to pay back any of the debt.
Now let’s pretend that Tom and Jane both go to Old Navy and open a credit card. When the application is filled out, both names are put on it and both have their credit report ran as part of the application process. In this situation, Tom would be the primary holder, and Jane would be the co-signer of the card; although the credit card will report on both credit reports the same. Let’s say that things turn for the worst and Tom and Jane split up; at this point they are BOTH equally responsible for the debt on the Old Navy credit card. When you co-sign for a debt you immediately take equal responsibility for that debt obligation. It’s important to understand they aren’t each only responsible for one half of the debt, instead, they are each responsible for the entire amount.
As a general rule of thumb, if you can avoid doing so, don’t co-sign on the debt with another person. If a finance company is requiring a co-signer then they believe the original debtor will not pay for the debt if they don’t have someone else sign for it.