Co-signers And Your Credit

When consumers have not yet established their own credit history, a co-signer can serve as a bridge to potential credit. However, it is important to be aware of the obligations and risks that come with co-signers and your credit.

What Is A Co-signer?

A co-signer is any person who signs a loan agreement with you. By signing, that person takes on responsibility for the debt with you.

When Should You Use A Co-signer?

Typically, people need co-signers when their own credit history or financial record is not significant enough to qualify for credit on their own. Many younger consumers without credit histories may need co-signers for new credit cards, student loans, mortgages, or other credit products.In addition, someone with poor credit may require a co-signer.

If a co-signer’s credit and credit history is better than yours, their signing your credit application will help you receive the credit. In all cases, you should be careful when using a co-signer. Since the debt you take on is shared with your co-signer, it may be especially important for you not to default on that debt.

When Should You Be A Co-signer?

As the previous paragraph indicates, a co-signer takes on a significant risk when they co-sign any document. Co-signing is a legal obligation, and as such should not be taken lightly. Usually, people only serve as co-signers for deeply trusted friends and loved ones because of the necessary risk. That said, if you are able and willing to co-sign a document, you can provide a financial opportunity for the person you assist.

Using Co-signers To Help Your Finances

Co-signing is a delicate mix of personal and financial matters, for both parties of the document. However, if you are willing to take on the responsibilities of co-signing, it can help the person being signed for obtain a variety of credit products.

This article is part of TakingCredit.com’s credit card glossary. You can learn more about credit through our archive of credit card tips and our credit card blog. Photo by Hammer51012.

Tags: co signer, consumers, credit application, credit cards, credit histories, credit history, financial matters, legal obligation, loan agreement, poor credit, student loans