How will Co-Signing Student Loan Affect My Credit / and Score

[TeeandDee]

Hi All,

It is looking like I will need to co-sign for my son's student loans so he can finish his Junior/Senior Year in College. My credit is very new (I made mistakes back in my 20's and early 30's) and now I'm back on my feet with new credit and clean credit report.  The last thing I want to do is damage my credit again in anyway.  Plus I have a daughter who will be entering college too so will need help as well.

How will co-signing affect my FICO Score and how is it reported...as an "Installment Loan"?  I'm not too concerned about missed payments etc.. because I will be the one paying the loans because my son only has a part time job and is not able to pay any hefty loan payments.  Also,will I even qualify to co-sign since my credit is new, I have a ton of new inquiries  (due to my apping spree back in December).   I have no baddies, and no late or missed payments.  Lastly, how will having these loans affect my ability to get new credit for myself in the future?? (Car loans, mortgage, credit cards, CLIs)??

I do not mind helping my kids to get their education, I'm down for that all day every day!   I just want to be educated on how it will affect me in the long run as far as my credit report/score, and my ability to get new credit in the future if I need it so I can be prepared etc..

[atarvuzdar]

There is a good chance these won't even show up on your credit report(s) at all, unless and until there are late payments. They will show up on your son's report for sure. If you are going to be the one paying the loans, keep this in mind as any late payments you make will bring his score down! My mother co-signed for one of my student loans and, like you, paid it off (she made payments on-time, all the time and it's now my oldest tradeline and the brightest shining star on my credit report--however, it never showed on hers).

The impact is not too bad if they do show up on your reports--the typical new tradeline ding, and will affect your/his debt-to-income ratio--but as they age they will show as good positive installment tradelines for your son (and you, if they report) so long as there are no missed payments.

Good luck!

[marty56]

Before you go down this road, please read this thread:

http://ficoforums.myfico.com/t5/Student-Loans/cosigned-on-student-loan/td-p/1305889

[cdtotten]

Don't cosign student loans... ever. I don't care if it is family, friends, or the priest at your church... don't do it.

Cosigning is always a bad idea, but when it comes to student loans that 99.9% of the time cannot be discharged in bankruptcy, you know that the payment will always be looming over year and they will eventually get their money back. There is a cosign nightmare story posted on these boards almost once a week. Read them and run away.

[FrugalRican]

Why does your daughter need her loans co-signed?

And how can it affect your credit? Positively, if you think you can pay off the loan on your own in case your children bail on it.

[TeeandDee]

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@atarvuzdar wrote:

There is a good chance these won't even show up on your credit report(s) at all, unless and until there are late payments. They will show up on your son's report for sure. If you are going to be the one paying the loans, keep this in mind as any late payments you make will bring his score down! My mother co-signed for one of my student loans and, like you, paid it off (she made payments on-time, all the time and it's now my oldest tradeline and the brightest shining star on my credit report--however, it never showed on hers).

The impact is not too bad if they do show up on your reports--the typical new tradeline ding, and will affect your/his debt-to-income ratio--but as they age they will show as good positive installment tradelines for your son (and you, if they report) so long as there are no missed payments.

Good luck!

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Thank so much for the response and sharing your experience with this! It's also good to hear that it may not report on my credit report, not sure my report can take the new account ding right now...lol! No worries about late payments since I will be making the payments.  

[TeeandDee]

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@FrugalRican wrote:

Why does your daughter need her loans co-signed?

And how can it affect your credit? Positively, if you think you can pay off the loan on your own in case your children bail on it.

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My daughter will need a co-signer because she's 18 years old, will be be fresh out of high school and no way can she be approved for a student loan on her own.  She's just starting out in life...lol!  That's what parents are for!  As long as my children are going to school and being productive members of society, I'm going to do all I can to help them get on their feet in life!  That's what mom's are for!   The only pay back I need is them to go on and live a honest, productive, good life, and do well in college! As long as I'm able...tutiion is on me!  Not them! So no worries of them bailing on something that's on me and Dad in the first place!  After they graduate and if they get that good job, then they can help make the payments, but that's not something I will be relying on when I enter into this.  I think that's the decision parent's need to decide on before entering into something like this. 

[TeeandDee]

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@cdtotten wrote:

Don't cosign student loans... ever. I don't care if it is family, friends, or the priest at your church... don't do it.

Cosigning is always a bad idea, but when it comes to student loans that 99.9% of the time cannot be discharged in bankruptcy, you know that the payment will always be looming over year and they will eventually get their money back. There is a cosign nightmare story posted on these boards almost once a week. Read them and run away.

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It depends on your perspective.....My husband and I decided that we would be responsible financially for  our childrens's college eductation.  Their main responsiblity in it is do do well and not waste our money...lol!  Would I co-sign for anyone else...heck no!  Never have, never will.  But college education for my kids....yes!    But the buck stops there! No co-signing for cars, houses, personal loans etc..  That's on them! LOL!

[marty56]

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@TeeandDee wrote:

After they graduate and if they get that good job, then they can help make the payments, but that's not something I will be relying on when I enter into this.  I think that's the decision parent's need to decide on before entering into something like this. 

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That is a big if these days.  Also you don't know what will happen in the future with your job.  It is great that you want to help your daughter but IMHO you are making a big mistake.  I hope that I am wrong though.

[FrugalRican]

Tee, if she NEEDS a co-signer, I'm guessing the tuition per year is pretty steep, correct?