Clarification on Co signer

Stugotsv10 · ‎05-27-2020

First question is...

Say I have great credit and I'm willing to co sign for a loved one, CAN the bad credit loved one ruin the approval? is it better to just sign myself?

Also with this bad credit person how bad will is hurt the interest rate?

Lastly as the co sign will it show up on my credit report? and if how will it SAY Co signer?

Thanks.. this is my first time CONSIDERING Co signing lol

Brian_Earl_Spilner · ‎05-27-2020

1) never co-sign for anyone.

2) if their credit is bad enough, a lender can refuse to put them on the loan

3) it can affect the interest rate, but their income can help the approval

4) it doesn't report differently because you're both equally responsible.

thornback · ‎05-27-2020

The loan will show on your credit report. Both your credit and the other borrower's credit will be considered but how either influences approval and rates is lender specific. Whether you should just sign as the primary without the other borrower would depend on the rates you are quoted alone vs. as a cosigner (and whether approval is even possible with the primary's bad credit).

If the primary borrower screws up with payments --- and you, as the cosigner, don't catch it in time to fix it, then the late payments will also appear on your reports and, obviously affect your scores. Doesn't matter if the tradeline says cosigner or not -- you're equally responsible for the debt. So if they fully default, debt collection activity (including legal action) will also affect you.

I always recommend against cosigning -- even for loved ones/family/kids -- unless you know you will be the person making the payments and are cosigning only to help the other person build credit. Do not just cosign and assume the primary is making payments - you will need to stay on top of it every month.

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coldfusion · ‎05-27-2020

@thornback wrote:

If the primary borrower screws up with payments --- and you, as the cosigner, don't catch it in time to fix it, then the late payments will also appear on your reports and, obviously affect your scores. Doesn't matter if the tradeline says cosigner or not -- you're equally responsible for the debt. So if they fully default, debt collection activity (including legal action) will also affect you.

I always recommend against cosigning -- even for loved ones/family/kids -- unless you know you will be the person making the payments and are cosigning only to help the other person build credit. Do not just cosign and assume the primary is making payments - you will need to stay on top of it every month.

These are the key things to take away. It is not the creditor's responsiblity to notify the cosigner of a pending issue so if the applicant is not forthright about problems in the making the cosigner will only learn of them after damage has been done to both profiles.

Think of it as a big anchor tied to the ankles of both the applicant and the cosigner and the cosigner's back is turned. If the applicant pushes the anchor off the side of the boat the cosigner only realizes it when they feel themselves being dragged over as well.

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Iusedtolurk · ‎05-28-2020

@Stugotsv10 wrote:
First question is...

Say I have great credit and I'm willing to co sign for a loved one, CAN the bad credit loved one ruin the approval? is it better to just sign myself?

Also with this bad credit person how bad will is hurt the interest rate?

Lastly as the co sign will it show up on my credit report? and if how will it SAY Co signer?

Thanks.. this is my first time CONSIDERING Co signing lol

If you co-sign for someone you have to look at the debt as yours and the only way you can be sure it will not affect you negatively is you have to verify that each payment is made on time before time. If their is a problem you must make the payment on time before time in order to keep the account in good standings.

Anonymous · ‎05-29-2020

Do not think of it as co-signing, it's much more than that. Think of it as co-borrowing, co-responsibility, co-risk. You take on all the risk as if you'd borrowed the money yourself, except someone else is getting the benefit of the loan. If they don't pay, it's on you to pay, or your credit gets dragged down.

See threads on here all the time: I cosigned, it was a super close friend/family member. They promised to always pay on time (outstanding credit report to the contrary). Thought it just let them use my good credit. Now I have several lates on my report, and they aren't paying the loan. Help, what do I do!?

They won't be able to refi by themselves (the whole reason they needed co-signer in the first place) and wouldn't have much motivation to do so anyway. Another thing, when you need to get your own loan for something being co-signed on the other loan can/will affect you. Even if the other person is paying the $300/mo payment, your new lender will consider you are paying that $300/mo payment. Could get denied for too high DTI.

Not trying to be overly harsh in my post, just need to make sure you understand what you are getting into. Would STRONGLY recommend against doing this.