Consumer Tips

How Will Cosigning Affect Your Credit?

Gerri Detweiler

May 19, 2015

A Few Facts About Cosigned Accounts:

• When you cosign, you agree to be responsible for the entire loan as if it is your own. If the primary borrower (the person for whom you cosign) pays late, or doesn't pay at all, you are on the hook for the entire loan plus any fees.
• In most cases, the lender does not have to notify the cosigner of late payments on the account. If the bill goes unpaid, you may not find out about it until you get a call from a collection agency.
• If the lender reports your account to the credit reporting agencies, the account will be reported under both the primary borrower and cosigner's names. The account affects both the borrower and cosigner's credit scores equally. The credit score does not handle a cosigned or joint account differently than an individual account.
• Even if the bills are paid on time, the debt will be included when calculating the cosigner's credit score, and could affect the cosigner's ability to get a mortgage or other loan.
• Lenders almost never remove cosigners from joint accounts. The primary borrower can refinance the loan, but if they are having trouble making payments, it is unlikely they will be approved on their own. In most cases the account will have to be paid off in full and closed in order to separate the secondary borrower (you) from the primary borrower.