Reasons to Cosign a Loan
The loan can hurt your credit score.
A high unpaid balance on a loan you co-signed can hurt your credit utilization ratio, which is the percentage of your available credit that's in use and is a major part of your credit score.
Cosigning for private student loans may reduce the interest rate your child has to pay on loans for their education and boost their credit score if regular on-time payments are made. But there are a lot more things – including your relationship with your child – you should consider before making this decision.
A co-signer is someone who adds their name to the primary borrower's loan application, agreeing to be legally responsible for the loan amount, and any additional fees, should the borrower be unable to pay. Most people want or need a co-signer because they can't qualify for the loan by themselves.
Co-signers also help prospective borrowers get a much lower interest rate on a loan than they could on their own. An ideal co-signer will likely have: A credit score of about 670 or higher, which is considered “good” by the two primary credit score analysts—FICO and VantageScore.
Removing Your Name From a Cosigned Loan
If you cosigned for a loan and want to remove your name, there are some steps you can take: Get a cosigner release. Some loans have a program that will release a cosigner's obligation after a certain number of consecutive on-time payments have been made.
How does being a co-signer affect my credit score? Being a co-signer itself does not affect your credit score. Your score may, however, be negatively affected if the main account holder misses payments.
Possible disadvantages of cosigning a loan
The risks of being a co-signer
Late payments on a co-signed debt can hurt your co-signer's credit score. ... That means any credit events related to the loan, such as late and missed payments, will appear on your credit report and your co-signer's credit report.
As a general rule, unlike so many things in life, co-signing is pretty much forever. In the case of a lease, this means that the co-signer is responsible for the lease for the duration of the agreement, whether it's a six-month lease, a yearlong lease or for some other period.
So here's the list of 8 things to do to protect yourself when you cosign for a loan.
In a strict sense, the answer is no. The fact that you are a cosigner in and of itself does not necessarily hurt your credit. However, even if the cosigned account is paid on time, the debt may affect your credit scores and revolving utilization, which could affect your ability to get a loan in the future.
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