Does Co-Signing for a Car Affect My Credit Score?

Sometimes cosigners must make car loan payments for the primary borrower.

Those asked to cosign a car loan should think about the request very seriously. Sometimes lenders require a cosigner when giving loans to people with bad credit. People with little credit history also need cosigners. Those asked, however, should understand that cosigned debt not only affects the primary borrower's credit, it also affects their own.

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If the primary borrower pays a late car payment, it lowers his credit score along with the cosigner's credit score, according to the website Bills. The cosigner may not even know about late payments because he doesn't receive a monthly statement.

Ratio

Cosigned car loan debt shows up on the cosigner's credit report just as it shows up on the primary borrower's credit report, states Experian Information Solutions. This means any debt affects the cosigner's debt-to-income ratio and could prevent her from qualifying for a loan of her own.

Solution

Some lenders overlook cosigner debt if they see a consistent positive payment history and have proof of steady income, according to Mortgage House Inc.

Consideration

Cosigners should make sure their finances allow for full financial responsibility if the primary borrower cannot pay the car loan payments.

References

• Bills: Effects on Credit of Co-signing for a Loan
• Mortgage House Inc.: FAQ
• Experian Information Solutions Inc.: Credit Score Basics