CO-SIGNERS CREDIT RATING

I am trying to get a new car and some people tell me they don't want to co-sign because it will make their credit look bad for when they want their own car. I know I can pay the car note so if my account is in good standing will it make their credit go up or down? Will it help my credit having a co-signer? Please let me know asap. thank you

(Unsigned)
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Unsigned,

Co-signing a loan is a virtual no win situation for the co-signer. If you default on the loan he has the same responsibility to that loan agreement as you do, except you have the car and he has nothing.

The credit rating of the co-signer could be affected if other lenders are aware of the obligation. Simply, would you rather lend money to a person with a $20,000 obligation or no debt? What if the person you want to co-sign for your car needed a vehicle but was turned away because of his obligation to pay for your car?

When you say “some people” it sounds as if you have asked several to be co-signers. The fact that you “know” you can make the payments provides no assurance to the co-signer. Read some of the posts in this column from people that defaulted as quickly as “over the weekend.”

If your credit is in good standing and you know you can make the payments, why does the lender require a co-signer? Why would “some people” want to guarantee a loan that a finance company denies? Co-signing is the kind of thing parents do for their kids, not a convenience for friends.

Having a co-signer will help you get the car but I do not think it impacts your credit rating, one way or another, to any serious degree. If you default on the loan and the co-signer has to assume your obligation it might well factor into their credit rating, to what degree depends on their ability to absorb that additional obligation.

I suggest you accumulate all that money you “know” you will have. After you have several thousand for a down payment seek out a car you can afford on your own.

Everybody’s Uncle