Posts Tagged ‘Co-signer and credit score’

Co-Signing A Loan Can Affect Your Credit Score

Co-signing a loan can affect your credit score both positively and negatively depending upon an array of factors. When you co-sign a loan, you actually become a loan guarantor (co-signer is another term), which means you promise that if the primary borrower fails to make the repayment, you will pay off the loan. If you have any closed relative or friend who has very poor credit score, they may contact you and request you to help them by becoming a co-signer so that they can qualify for a low rate loan easily. If you have a better credit history, the lenders may agree to issue a low rate loan to your friend if you guarantee the loan. When you sign the agreement as a loan guarantor, you also become liable for the repayment of the loan in specific circumstances. The effects on credit score is similar to what happens to the credit score of the primary borrower when he/she makes the payment in time or when he/she fails to make the repayment. It can be risky but sometimes be rewarding too.

Your Score May Increase

Just by co-signing a loan can affect your credit score actually provides you an opportunity to increase your own credit worthiness without making any effort. However, it entirely depends on one thing – whether the primary borrower, your friend who you co-signed for, is making the repayment in a timely manner. If yes, you will get the reward. It is very important for you to keep in mind that when you co-sign for a loan, it is reported into your credit report also as a liability. Now, when the loans are paid in time, the same thing is again reported to your credit report as positive entries. This way, timely payments of such loans can actually help both the primary borrower as well as the co-signer to achieve a better FICO score.

Your Score May Decrease

Co-signing a loan can affect your credit score does provide you an opportunity to strengthen your credit, but at the same time, it can also be very risky. What if the primary borrower stops making the monthly payments? In that case, the lender will contact you and ask you to make those payments. Even if you make that payment, the last month default or the late payment thus made will negatively affect your credit score. This situation can be more complicated if you already have your own debts to pay off. Since the payment on the loan you co-signed for is now an additional liability on you, you may have to face problems in paying other debts that you owe. Any debt that you miss to pay off in time is going to have a negative effect on your credit report.

Overall, as you can see, whether co-signing a loan can affect your credit score is good or bad for the health of your credit report depends upon an array of factors, the most important of which is whether the primary borrower pays off the debt in time or not.


Custom Search
Bankruptcy

Basic Things You Must Know About Bankruptcy Dismissal

When you file a petition for bankruptcy and the court rejects your petition on certain grounds, it is legally termed as bankruptcy dismissal. Dismissal means your case is officially closed and that the court will make no further rulings on your case. Some of the most common reasons why a petition is...

Bankruptcy
Credit Repair

Building Credit With No Credit

When it comes to building credit with no credit, there are several online canadian pharmacy factors that you need to take into account. Just because you do not have any credit history at present, it does not mean you will never have one. No one is born with a readymade credit history. You have to gi...

Credit Repair

A Loan To Defeat All Loans Debt Relief Loan
Payday loans fax-free payday loans and instant online payday loans are everywhere be it on the Internet newspapers or television. Today when the economy is in turmoil these loans look like the saving gra... Read more

Tips On How To Consolidate Payday Loan Debt
You may need to consolidate payday loan debt when you are caught in the middle of a financial crisis arising out of your inability to repay multiple loans. Debt consolidation loan allows you to consolidate all... Read more

Do Not Put Up With Debt Collectors Harassment
There was an emergency and the need arose to take a payday loan. It seemed to be the fastest and the best option available then. However now the debt collectors harassment is horrendous. The fact that using t... Read more

Consolidate Payday Advances To Save Yourself
Payday advances are loans taken against a persons paycheck. They have a way of digging into your paycheck month after month. They usually have exorbitant interest rates though the sites offering the services... Read more

Can I Consolidate Payday Loans
Can I consolidate payday loans is a question you are sure to ask yourself when faced with a trying financial situation. When payment of loans becomes difficult it is possible to consolidate and replace many... Read more

What are the pros and cons of debt consolidation?