If I Finance a Car Using a Co-Signer, Will My Credit Score Go Down?

Co-signing on a car loan can hurt your credit.

Your credit score, also known as your FICO score, is one method that a creditor may use to determine how much risk is involved in lending money to you. Your score can fluctuate over time because of a number of factors. Using a co-signer to qualify for financing will not affect your score. It will, however, influence the co-signer's score.

Determining Your Credit Score

Credit scores are determined by factors including your payment history, the amount of debt you have and how long your accounts have been open. Each of the three major credit bureaus may have a different score for you, depending on what information is included in your credit reports with them.

Why You May Need a Co-Signer

If your credit is less than perfect or you have a short credit history, you may need a co-signer on your car loan application to get financing. Co-signers generally need to have good credit. They are responsible for repaying the loan if you don't.

Co-Signing and the Effects on Credit

Whenever you open a new credit account, it reduces your credit score because it increases your potential debt burden. If you have a co-signer for your loan, that loan will also appear on his credit report and affect his credit score, because it will be considered part of his overall debt as well. If you make late payments or default on the loan, your co-signer's credit will be damaged.

References

• My Fico: Understanding Credit Scores
• Federal Trade Commission: Co-Signing a Loan
• Bankrate.com: The basics of co-signing a loan