Effects on Credit of Co-signing for a Loan

What are the risks of co-signing on a loan? Will it affect my credit rating and my ability to get other loans for myself?

Can I be hurt by co-signing? What are the risks? Will it hurt or limit my credit?

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Bill's Answer
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  • Learn how co-signing affects your credit.
  • Know the risks when you co-sign a loan.
  • Protect yourself as best you can, when you co-sign a loan.

You ask excellent questions about the risks of co-signing on a loan.

The Co-Signer and Financial Responsibility

Although you may want to help a family member or friend who cannot qualify for the loan without a co-signer, it is important for you to understand what your obligations are when you co-sign on a loan. When you co-sign a loan, you take responsibility for repaying the loan if the primary borrower does not. This means you may repay the loan plus any late fees, interest, or other charges the lender has added if the lender cannot collect from the borrower.

FTC Rules About Co-Signing

According to the Federal Trade Commission (FTC), a co-signer must be presented with a detailed disclosure by the lender before he or she co-signs for the loan that explains the co-signer’s obligations.

The disclosure reads, "You are being asked to guarantee this debt. Think carefully before you do. If the borrower does not pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

"You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.

"The creditor can collect this debt from you without first trying to collect from the borrower. (Depending on your state, this may not apply. If state law forbids a creditor from collecting from a cosigner without first trying to collect from the primary debtor, this sentence may be crossed out or omitted altogether.) The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.

"This notice is not the contract that makes you liable for the debt."

As the disclosure explains, the co-signer is exposed to a lot of potential financial harm. Remember, even if the person you co-sign for has every desire and intention to repay the debt, if circumstances arise that make his/her repaying impossible, the co-signer is on the hook. Loss of income or job, an illness, or some other unforeseen event could impede the person’s ability to pay, leaving the co-signer the only with means to pay it back and fully liable to do so.

According to the FTC, "Studies of certain types of lenders show that for cosigned loans that go into default, as many as three out of four cosigners are asked to repay the loan." The only reason the borrower is being asked for a co-signer is that the lender decided that the risk was too great to offer the loan without one. Sometimes, this is not due to the borrower having a poor credit history of bad payments, but due to the fact that the borrower has never had credit before. Having a loan co-signed for, if the loan is paid back as agreed, is a great way for a person without credit to establish credit worthiness, though that does not lessen the co-signer's responsibility in any way.

The Effect on Credit for the Co-Signer

Another impact you asked about was effect on the co-signer’s credit. There are two main effects. First, it will appear on your credit report, much like any other debt. If payment is late, for instance, that derogatory notation will appear on the your credit report, lowering your credit score. This can happen well before the co-signer has any idea that there is a problem, as the co-signer does not often receive a monthly billing statement.

Secondly, because the co-signed loan shows on the co-signer’s credit report, it may prevent the co-signer from obtaining credit. If a co-signer is planning to buy a house, car, or other large purchase during the life of the co-signed loan, it is a good idea to think about the implications. For instance, it is prudent to consider whether the co-signed loan would negatively affect the co-signer’s debt to income ratio and be a reason for not qualifying for the desired loan, even if all payments are made on time on the co-signed loan.

If You Decide to Co-Sign

Despite the risks involved, a person may decide to co-sign a loan, to help out a friend or family member. If the decision is made to co-sign, here are some things to keep in mind.

  1. Be certain that you can afford to make the payment on the loan, while maintaining your other financial obligations. If you cannot, you increase the risks that you could end up suffering collection efforts, including a wage garnishment, along with your credit rating suffering.
  2. If you are asked to pledge anything as security, such as a home or car, be aware that you could lose the asset, if the borrower defaults and you are not able to pay back the loan.
  3. You can make certain requests from the lender, which can offer you a degree of protection, though the lender does not have to grant them. For instance, you can ask the lender to make it so that you are responsible only for the principal of the loan, so you are not liable for late charges and collection fees. You can also ask that the lender notify you if a payment is late, so you can try to fix the problem before it gets out of hand and hurts you. In either of these cases, get the assurance from the lender in writing, or it is not going to help you.
  4. Keep all the records and paperwork associated with the loan. This way, if there is any dispute, you have records. Because the lender is not required to give these records to you, make sure to get copies from the borrower.
  5. Because rules can vary from state to state, check with the consumer rights department in your state of residence.

The FTC details .

I hope this information helps you Find. Learn & Save.

Best,

Bill

56 Comments

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  • 35x35
    May, 2013
    Sameer
    I have a recent car loan with a co-signer. I made three payments on time. But, now my co-signer doesn't want this debt to appear on his credit report. How can I remove this from his report? Can I qualify for a re-finance without co-signer after just three payments? I don't mind if the interest rate is a bit high.
    0 Votes

    • 35x35
      May, 2013
      Bill
      Before I answer your questions, allow me to discuss three background issues:
      • Lenders are not required to report payment information about their borrowers to the consumer credit reporting agencies. However, if they do, the reports must be accurate. Some auto finance companies report information to the consumer credit reporting agencies, and others — such as buy-here-pay-here dealers and title lenders — tend not to. If your lender reports information about your loan to the consumer credit reporting agencies, then this loan's payment status will appear in both your credit report and that of your co-signer's.
      • This loan has two impacts on your co-signer's credit report. First, if you become delinquent on your payments, this will drag your co-signer's credit score down. Second, if your co-signer applies for a loan, this loan will be included in his or her debt-to-income (DTI) ratio.
      • The biggest reason for your co-signer to want you to refinance the loan in your name alone is to remove his or her liability for the loan. Should you default, the lender may collect up to 100% of the balance due from either person who signed the loan.

      On to your questions:

      1. Accurate information cannot be removed from a credit report. Here, the co-signer has liability for this loan, which has a potential impact on the co-signer's ability to qualify for a future loan. I do not see a way for your co-signer to dispute this information and have the loan be removed from his or her credit report.
      2. You are on the right track in asking about refinancing this loan. I will assume you did not qualify for a loan by yourself three months ago, otherwise it is likely you would have avoided involving a co-signer. The question you should be asking is, "Has my creditworthiness improved enough in three months for me to qualify for a loan on my own?" Without seeing your credit score, looking at your DTI, and understanding your income history, I cannot answer your question. Talk to a loan officer at your bank or credit union to understand what you need to do to qualify for a vehicle refinance.

      If your issue was a thin credit file, in other words you do not have a long credit history, then three months on one loan will probably not be enough for you to qualify for a refinance. However, each auto lender has its own qualifications for refinances, and you need to talk to several lenders to learn if you qualify.

      0 Votes

  • 35x35
    Feb, 2013
    Mike
    I co-signed for a loan for my nephew back in 2001. As far as I knew, all payments were made and the loan was paid off in 2005. Now, a collection agent is calling me about an upaid balance. What do I do?
    0 Votes

    • 35x35
      Feb, 2013
      Bill
      Take these two steps:
      1. The next time the collection agent calls, gather all of the contact information you have about his or her employer, including name, mailing address, and telephone number. Then send the collection agent a debt validation notice. Follow the hyperlink I just mentioned to learn how.
      2. Call your nephew and ask if he is current on the debt.

      If your co-signer is current on his payments, then you are dealing with a fake debt collector.

      0 Votes

  • 35x35
    Jan, 2013
    Joie
    I bought a car last 2011, and because i didn't have a credit history yet (at that time) my uncle agreed to co-sign me. But lately, he's been having problems financially, and i know that he's been having troubles with late payments and such. I have been very good with my payments and all, my question is, will he (my co-signer) affect my credit score in anyways? If he is, what should be my next step? Should i take him out of the contract? I'm really worried because i've been trying to build my credit worthiness..
    0 Votes

    • 35x35
      Jan, 2013
      Bill
      Joie, your uncle's financial struggles will not harm your credit score. As long as your car payments are paid on time, your score will benefit from your auto loan being listed (and your uncle's score will benefit from that account in good standing, too). Until you can qualify for a better interest rate on your own than you got with him as a co-signer, there is no reason for you to try to refinance the car loan and have him removed.

      As your goal is to build a strong credit score, I recommend that you open some other credit accounts (credit cards, for instance), so that you have more active accounts reporting. Do not run up debt on your new cards, but make occasional purchases and pay them off in full.
      1 Votes

  • 35x35
    Sep, 2012
    nazer
    I have co-signed for a car loan for my friend who do not have credit history .after an year my friend moved to different city. After 2 years of regular payment without missing even single payment , the car went into accident and it only has a labiality coverage. I came to know about the accident when the towing company contacted me to sign and fax a voluntary surrender form to sell the car in auction . After signing the form, a month latter my credit score has fallen down from 710 to 620 all of a sudden .My friend is ready to make a payment for the remaining balance but the financers took time to sell the car and give us the balance amount. Now my question is why is delinquency / derogatory activity is reported on my credit report. First of all why co-signer has got to do with the accident and more over I observed my friends address reflecting as my previous address on the report. There is never a missed payment nor he is making delay in paying off the balance . Please advise how I can fix this negative flag on my credit history . Any advice is highly appreciated.
    0 Votes

    • 35x35
      Sep, 2012
      Bill
      As a co-signer, you are 100% responsible for the loan. Your credit problems began when you agreed to a voluntary surrender, which was reported to the credit bureaus. The faster the debt is brought down to a $0 balance, the sooner you can begin rebuilding your score.

      You can try to speak directly with the creditor, to see if they can change how the account was reported to the credit bureaus.
      0 Votes

  • 35x35
    Jul, 2012
    Stephanie
    I have a question relating to co-signing in FL. My friend co-signed for a charge card for me. Due to divorce, I could not make the payments. My friend moved out of state and obtained a mortgage and has since passed away. How can his mortgage show up on my credit report when I never had any part of the mortgage? I'm so confused and I'm trying to get my annual credit report and I have to mail proof because I couldnt answer the security questions about his mortgage. HELP!!!
    0 Votes

    • 35x35
      Jul, 2012
      Bill
      Your friend's mortgage should not appear on your credit report whether he or she is alive or dead. The only way your friend's mortgage could appear on your credit report legitimately is if you were a co-signer on the mortgage.

      Dispute the false information with each of the three credit reporting agencies that report it.
      0 Votes

  • 35x35
    Jul, 2012
    Dan
    Hello I have a questions related to your post. For my 18th birthday my mother added me onto her existing secured credit card as an authorized user and it was given to me inside my birthday card. She told me I could use it to go to dinner that night with friends and to buy myself a small gift and then only for emergencies. I never used the card after that as my mother and I had a falling out. When my credit report was pulled for my recent job on it was a 3,000 secured card that was defaulted on. I never signed any documents for the card but it did have my name printed on the card and now its negatively impacting my credit. What are my options for rectifying this? I'm 24 and trying to repair my credit but this is just beyond my means. Thank, Dan
    0 Votes

    • 35x35
      Jul, 2012
      Bill
      A credit reporting agency will report negative information for 7 years after the first 180 days of delinquency. An authorized user can build credit if the payments are made on time; however, if there is negative activity, their credit score decreases. The advantage of an authorized user status is that you should not have any legal liability for the debt. Make sure that the entry is recorded correctly, including paid in full. (I assume that the debt on a secured card was paid in full). If you feel that there is incorrect information, then file a credit report dispute with the creditor and/or the Credit Reporting Agency. It is possible that the creditor will not respond, and the item will be removed.
      0 Votes

  • 35x35
    Jun, 2012
    Michelle
    I plan on financing a car in a month or so. My credit is bad (610) — horrible spending habits in college, but I am now debt free, work full-time with a good salary. I received quotes for a car loan and I would get anywhere between 13%-17% interest rate. I informed my father and he voluntarily offered to cosign with his excellent credit (in the 800s). With his credit on his own, he would receive a 2.9% interest rate.
    1. If he does cosign for me, will I get that 2.9% as well, or will it take both scores into consideration and be somewhere in between our interest rate quotes?
    2. Would it be closer to his quote or somewhere in the middle?

    Thank you for the help!

    0 Votes

    • 35x35
      Jun, 2012
      Bill
      The correct answers to your questions are "it depends." I went through the process you described with one of my adult children recently. Each lender's underwriting department has its own polices for looking at an applicant with no or low credit, and a co-signer with a high credit score. Auto loan offers we received varied widely. Some lenders seem eager for loans and offer low rates regardless of the applicant's credit score, and others are not as aggressive. This is one time in life where shopping is the answer to your problem. In particular, look at local credit unions.
      0 Votes

    • 35x35
      Jun, 2012
      Michelle
      Would Lendingtree.com be a good start to shop around in order to get an idea of which lenders would offer us the best deal or should I go straight to banks and credit unions? Thank you for the response!!
      0 Votes

    • 35x35
      Jun, 2012
      Bill
      Shop, shop shop! The more information you get the more informed you will be as a consumer.

      One caveat: Once you start shopping in earnest, narrow your focus of lending candidates and complete applications at several banks or credit unions in a brief period of time — several days at the most. Doing so will cause FICO to treat multiple credit applications, called hard pulls in the credit business, as a single pull. Hard pulls spaced out over time will cause a slight decrease in a person's credit score. If you are already borderline, this will push your score further south.
      0 Votes

  • 35x35
    Apr, 2012
    Michael
    I plan on financing a car in the summer. I just graduated with my Master's and will begin my job in June. My credit is very bad (had a tough time with credit cards during my undergrad, but are all paid, but my credit is still very bad). My brother agreed to cosign because he knows I would get a better rate with his excellent credit. He doesn't know about my horrible, horrible credit and he just figures that getting out of school, I will have average/ below average credit, so he is willing to help me out with a better rate. Since my undergrad financial fiasco, I have been very responsible with money, owe no money (besides some student loans) and own no credit cards. I have 30% for a down payment saved up and will have a full-time, well paying job so there will be no problem paying for the car. Basically, I want to know if my brother will be informed of my bad credit history/ horrible credit score when he does cosign. I am embarrassed and ashamed to tell him the truth about my past experience with money.
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      Co-signers on credit cards do not see the other's credit report or score as a matter of course. I do not know if that is customary for vehicle finance companies, banks, or credit unions, but I would be surprised if it was.

      My advice? Come clean with your co-signer. You need not reveal all of the gory details, but you can say, "I got in over my head with credit cards, and had some late payments, but all of my cards have either been paid off or current since (the date you got it together) and I learned my lesson." Or words to that effect. We all screw up at something at some point in our lives. It's embarrassing at the time, and sometimes we need the help of our family and friends to work through the consequences. But if you learn, admit your mistake, and don't repeat it, our friends and family forgive and forget.
      0 Votes

  • 35x35
    Apr, 2012
    mario
    I co-signed for some furniture for a friend for the amount of $3,000. He didn't pay. This has gone on for four years when I tried to get a loan to lower my interest rate on my car loan, that popped up. He called the collection agency and settled for a lesser amount. How will this affect my credit? I'm really worried. I was really looking forward to buying a house and this has set me back. I hope you can help guide me in the right direction.
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      When you co-signed, you took full financial responsibility for the debt. The derogatory account harms your credit. Depending on what else shows on your report, it could have harmed your score enough to delay a home purchase for a while.

      The fact that the debt is now at $0 balance is good for two reasons. One, you won't face any collection efforts. Two, a paid-off collection account is better for your credit than one with a balance owing.

      Right now, you just need to take basic steps to improve your credit score.
      0 Votes

  • 35x35
    Apr, 2012
    Jess
    I have a car loan, Im the buyer of the car but I have a co-buyer. The co-buyer wants to purchase a home and is asking me to provide proof that I'm paying for the car loan to provide it to the underwritter. Is a bank statement the only document that can prove that I'm paying for the loan and not the co-buyer?
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      What your co-borrower needs is a way to show his/her underwriter that the debt should not be included in any debt-to-income calculations. You need to show that you're making the payments. In addition to bank statements, you could use cancelled checks or money order receipts, depending on how you make payment. If you pay cash, you create a higher burden of proof. Perhaps you can make a legal declaration that you make the payment? Have your co-borrower speak to the loan officer, to find out what the underwriter will accept.
      0 Votes

  • 35x35
    Apr, 2012
    Kay
    I need to take out a small student loan of $1000 from my bank but I do not make enough so I need a co-signer. My friend has offered to cosign for me but my question she plans on taking out her own student loans herself for fall and I am wondering whether her cosigning for me could affect the amount or chance of her receiving her student loans?
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      The monthly payment for your student loan, for which your friend is fully responsible, will be figured into her debt-to-income ratio (DTI). How the payment affects her DTI is the only issue that should affect her qualifying for another loan.
      0 Votes

  • 35x35
    Mar, 2012
    Rolando
    If I co-signed a car for my friend but they put me as the primary buyer and her the secondary and when is she able to refinance and will it affect my credit score?
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      1. Your co-signer will be able to refinance when he or she meets a lender's minimum standards for
        • Income history
        • Credit score
        • Debt-to-income ratio
      2. Your friend refinancing will probably not change your credit score. However, you will be able to qualify for more or different loans because your debt-to-income ratio will change.

      See the Bills.com resource Car Loan Refinance to learn more.

      0 Votes

  • 35x35
    Feb, 2012
    Michell
    My son has defalted on his student loans, and i have co signed them. He now has a job and is making monthly payments. How long will it take till my credit rating gos back up?
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Unfortunately, the answer is not so simple. Each credit bureau has different ways of arriving at their score. However, the main components in a credit score are timely payments, credit utilization and a good mix.

      Also, what you have in god standing on your credit report and how high your score currently is will influence how far your score drops and how quickly it rebounds. I recommend that you continue to monitor your credit report.
      0 Votes

  • 35x35
    Feb, 2012
    Elizabeth
    My mom is wanting to co-sign for me to get a newer car. Her credit is great, but mine isn't so hot. If all the payments are made on time, will that help boost my credit along with hers? Or will it just help her credit?
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Co-signing carries the risk for the "good" borrower, if payments are late, by harming both parties credit score. However,getting a loan with a co-signer is a good way to improve your credit score, as long as the payments are made on time.
      I recommend that you read the Bills.com article credit answers to learn more about credit scores and how to monitor them.
      0 Votes

  • 35x35
    Feb, 2012
    John
    If one who has excellent credit co-signs a note for purchase of a truck for secondary co-signer who has no credit history whatsoever, will final payment and discarge of the note be reflected in the secondary co-signer's credit report? How might the paid off truck loan be treated as a credit score where the secondary co-signer uses a secured credit card where purchases are sent by the issuer to the credit bureaus?
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Some credit score-related questions are difficult to answer authoritatively because the companies that write the credit score software release limited information about how their algorithms work. Anecdotally, we can say that credit scoring software treats a co-signed tradeline as if each co-signer is the only signer on the account. This means that if Co-signer A starts with a high 700 score, and Co-signer B has a 500 score and the account becomes delinquent, Co-signer A will see more damage to their score than B. Similarly, the benefit to both A and B for the co-signed loan will be in accordance with A and B's starting point. If A is already in the 700s, he or she will see a smaller boost than will B.

      How the loan is paid — check, money order, wire transfer, ACH — is irrelevant for credit scoring purposes. What matters is if payments are timely.
      1 Votes

  • 35x35
    Feb, 2012
    Noemi
    Hi, I am co-signing for my brother to help get a better credit. My question is, how soon can he refinance the car so I can be removed from the contract?
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      The primary borrower may refinance as soon as his credit history and financial picture improves to the point that lenders believe he is an acceptable credit risk.
      2 Votes

  • 35x35
    Dec, 2011
    John
    Hey I'm still not clear as to whether or not the actual act of cosigning will hurt my credit. I'm aware that if I cosign and the borrower negates on payments and whatnot, it may lead to a negative towards my credit. But will just having (in this case $3,000) this debt lower my score immediately? Thanks for your time
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      It is impossible to know how taking extra credit will immediately affect your credit score, which is made up of five factors. Read the Bills.com article about understanding your credit score. You will want to monitor your credit report and your credit score.

      Cosigning a loan is like taking a loan yourself. It will affect your credit mix, your total debt, and possibly your total available balance. Cosigning could even improve your credit score. The most important thing to remember is that you will be responsible for the loan, and if anything goes wrong, your credit score will be negatively affected, and even more important you will be liable to pay the whole loan and face aggressive collection efforts if unable to pay as agreed.
      0 Votes

  • 35x35
    Nov, 2011
    Jen
    My parents are trying to take out a federal student loan for me, but they need a co-signer. My grandfather has offered to co-sign but is wondering what the implications will be for his credit. How will co-signing on a federal loan affect his credit?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      The loan will be reported on his credit report. He will be required to sign a promissory note and will be responsible for the repayment of the loan. Any late payment will be entered on his report. For more information about parent student loans read the Department of Education's page about parent loans for students.
      0 Votes

  • 35x35
    Nov, 2011
    Shelby
    My mom co-signed for me on my car and a credit card. I am trying to get approved for a mortgage and my debit to income ratio is too high. Is there any way she can take over the loans if she agrees? How would we go about doing that?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      I doubt that the creditor will take you off the loan, though your mom could ask. Another alternative is for her to refinance the loan on her own. She could shop for a car loan and a credit union is a good place to start.
      0 Votes

  • 35x35
    Nov, 2011
    Kevin
    I just recently paid off a few debts on some settlements. How difficult will I able to buy/finance a car if my wife which has very good credit can co-sign for me? Also, if my wife co-signs for me on a car, will that ding her into financing a $500k house?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      If your wife has excellent credit and is willing to co-sign for you, then you should have no problem arranging for financing. The biggest effects on her are:
      1. She is financially responsible for the debt. Any late payments on the car loan will harm her credit score.
      2. The car payment will be figured into her debt-to-income ratio. If the size of the new car payment puts her over the maximum DTI allowed, then she won't qualify.

      She should speak with a loan officer to see if she can qualify with the new car payment, if the home purchase is more important to the two of you than the car purchase.

      0 Votes

  • 35x35
    Oct, 2011
    Kevin
    I am a co-signer of my brothers vehicle loan. He has never been late on any payment, and just recently sold the car to a cash buyer. The buyer paid off the car fully from our finance bank, the amount was $22,000. Now the car is paid off, and the bank is mailing me the title, which I will mail to the buyer. My question is, because I am the cosigner, will this improve my credit score?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Depends on the other tradelines in your credit profile. If you have several other strong accounts with long credit histories, then you will see no change to your score. If, on the other hand, this was your oldest account and you have few other tradelines, then your score will take a dip.
      0 Votes

  • 35x35
    Oct, 2011
    Carlos
    I made the mistake of personally financing (not co-signing) a car loan for my brother. Well, I recently checked my credit report and the loan is delinquent three separate times and says 31 to 60 days late. My question is, what are the chances of getting that cleared up by calling the bank, paying the loan, which is in its last year and telling them the circumstances. I have a perfect credit history otherwise and would like to keep it that way.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Unfortunately, I don't think you will be able to remove the derogatory information from your report. The finance company has to report accurate information to the credit bureaus and it is a fact that the payment was not made on time.

      Your situation underscores the risks of co-signing on a loan. Any time someone chooses to co-sign, he or she should try to set up an arrangement with the creditor to receive either monthly statements or a notice if the account is not paid on time. If unable to receive either, the co-signer could contact the creditor monthly, to check the status of the loan. Even a late payment and the fees tacked on don't harm the credit score of the co-signer, until the debt reaches 30 days late.
      0 Votes

  • 35x35
    Sep, 2011
    Joyce
    My husband wants to trade in his car and his late father's truck so he may only have 1 payment. The amount he owes on his car is way more than its worth. The truck's value is up to par and can be used towards a trade in. The problem arises because he filed for bankruptcy about 2-3 years ago. He needs a cosigner. My debt to credit ratio is extremely high; this due to everything being in my name (home, car, etc.), but my score is good. Would it be wise to cosign for him considering he has the bankruptcy on his credit? My credit worthiness has just begun to emerge to where I want it to be and I don't want to jeopardize the little bit of credit I have; considering we have only been married a year and we are looking to have children in the very near future.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Co-signing a vehicle loan will not increase or decrease your credit score. However, co-signing a loan will affect your credit utilization ratio in a negative manner.
      0 Votes

  • 35x35
    Sep, 2011
    Yajahira
    Hello, I recently financed a car. I was able to get a loan with no cosigner. However, because of issues with obtaining a license (which means issues with obtaining insurance) I will need a cosigner in order for me to add insurance to the vehicle (under cosigner's policy). My question is how will this affect my credit? Does having a cosigner/not having a cosigner affect my credit in different ways? Thank you.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Adding a co-signer will not hurt your score. The loan will still show on your credit report and will help your score, provided you make timely payments on your loan.
      0 Votes

  • 35x35
    Sep, 2011
    Alexis
    I have no credit and I need to purchase a car, I have 20% of the principle and steady employment, but I cannot get a loan. I have a friend with great credit however I want to limit her liability on a personal level, is there a contract or agreement I can have drawn up between the two of us?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      A contract between you and your friend binds you two, but is almost meaningless to third parties. If you default on the loan, the contract between you and your friend may give your friend a cause of action against you, but will not insulate your friend from liability by the lender.
      0 Votes

  • 35x35
    Jun, 2011
    Troy
    My girlfriend and I want to buy a house before we get married. We both have great credit, I have a steady income but she doesn't. She has money for the down payment. With my debt vs. income ratio and credit score I per-qualify for a 200k loan. The girlfriend has 200k for a down payment but we aren't looking for 400k house. More in the range of 250/300k. Question is if the girlfriend co-signs on the loan will she see a benefit in her credit as long as we make the payments and such?
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      As long as your girlfriend does not have a credit score below 500, she should be able to be on the loan. This will help her build her credit score, if the payments are made as agreed.

      It is my strong opinion that she should speak with an attorney and protect her financial interests. If you and she are both listed on title and each have a 50% interest in the house, you could leave her immediately and pocket half the equity upon sale of the home. I certainly do not wish the two of you and ill, but experience shows that people whose interests are aligned today may find their interests go in separate directions later. In my opinion, she should not put $200,000 into a house without having a lawyer draw up paperwork that lets her equity stake return to her, should the house be sold.
      0 Votes

  • 35x35
    Dec, 2010
    Ross
    I am a recently divorced male living in California. I was married for four years and bought a car while married to my ex. When we bought the car, I was the primary loan holder while she was the co-signer. When we legally separated in May of 2009 (and she moved back to VA), she took my car (against what I wanted), registered it under her name and has been making payments on it since. At the beginning of 2010, she filed for bankruptcy (in VA) and received Chapter 7. She now no longer needs the car or wants the car (which I have purchased an alternate vehicle) and she is threatening to stop paying the car if I do not take it back. She is threatening that payment will directly fall upon me and creditors will enforce payment from me. What are my legal options? Thank you, Confused in California but Vehicle is in Virginia
    0 Votes

    • 35x35
      Dec, 2010
      Was the vehicle included in the bankruptcy? How was the vehicle accounted for in your divorce decree? If your ex-spouse agreed to assume the payments, in other words take responsibility for the vehicle, then you have a cause of action (a legal reason to sue) your ex-spouse if the vehicle is repossessed. In the meantime, both parties have joint and several liability for the vehicle. If your ex-spouse allows repossession, then the creditor can collect whatever it can from either party regardless who was primary, co-signer, possessor, or whatever the divorce decree states. In other words, your ex-spouse is on the hook for a deficiency balance as much as you are.

      In a perfect world, you would have insisted that your ex-spouse refinance the vehicle before it left your possession. Alternatively, in a different perfect world, your ex-spouse would have included the vehicle in the bankruptcy.
      0 Votes