Whoa There Almost Homeless Guy
Well, you followed through. Most kids won't. My middle one was able to secure a credit card with a lot more than 400 credit line, and promptly screwed up.
WHY? Because one of her friends mom said it would be a good idea. Mom and I suggested against it. She listened to her friends Mom, and got way in over her head and now is about 30,000 in debt with no way out. Credit cards, car loan (car repossessed) and a multitude of other things.
She actually got pissed at us for not cosigning, well if we had, we would have been saddled with that debt now. And we knew it would happen.
See, that amount of debt would have needed your signature, if you
had co-signed, which you would not have done.
I would never advocate co-signing a 25K car unless I had the means to pay it off myself and was willing to, even under a different agreement.
If you co sign a card, let them build credit while they live with you on just one card and remove your name from the card policy when they move out, so they can get their own, when they are under their own management.
Even with this house under joint ownership between Amy and I, I went in knowing that I'd have to pay for it by myself, if need be, so that was the only way I was okay with it. You have to establish a certain level of trust with business, even with family and friends, but it is especially important to establish the ground rules with family and friends before going into it and always be sure that you can handle anything you're willing to let them spend.
If you can stick to that foundation, you're good to go, no matter which way it turns out.
Have them talk to you about larger purchases and if you are not comfortable with them, just be sure to cancel your name on the policy. I had a card with my ex that I had to do just that with, after her idiot mother got ahold of it one day and spent $800 that I had to pay off.
It happens, but if you help them along the way and let them pay for it with a max limit that you set on the policy, you've ultimately got the pen and the power, so you do have control.
On a technical note, when you co-sign on one item, card, car, house, etc., you are held equally responsible for that item and not all other items in the other person's name. If you signed for a credit card, you would be responsible for everything that was on the card, but not for things only in his name, like an auto repossession, or a bankruptcy in his name.
What would happen at that point, according to tax and credit law, is that his name would need to be removed from your policy on a card, before bankruptcy, because you can't file someone else's bankruptcy for them on shared responsibility relations. If you have joint ownership of something or joint credit/ joint taxes, etc. all of this is handled before filing.
What I've discovered is that its a lot harder for a teenager to pay a $400 limit card, so it teaches them a lesson if they max it out and you make them pay. You can do things like take something of theirs as collateral, like a video game console, car keys, bikes, music, valuables, etc. Just be sure that you tell them that this will be the case if they are vigilant on paying their debt and be sure to have enough in your own account to cover it, so it doesn't mar your credit.
A little planning and communication makes it work rather well. A few of my friends went through all of these scenarios and have good credit and ended up being very responsible people.