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How does co-signing a car impact credit? Part Of Financing a Car With a Co-Signer In this series Financing a Car With a Co-Signer Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering interactive tools and financial calculators, publishing original and objective content. This allows users to conduct research and compare data for free – so that you can make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site are from companies that compensate us. This compensation can affect the way and where products appear on the site, such as for instance, the order in which they be displayed within the listing categories in the event that they are not permitted by law for our loan products, such as mortgages and home equity and other home loan products. However, this compensation will affect the information we publish, or the reviews you see on this site. We do not include the vast array of companies or financial deals that might be available to you. SHARE Getty Images/Jupiterimages

3 min read published September 20, 2022

Written by Mia Taylor Written by Contributing Writer Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation’s leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers to control their finances with precise, well-studied information that breaks down otherwise complex subjects into digestible pieces. The Bankrate guarantee

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If you have questions about money. Bankrate can help. Our experts have helped you understand your finances for more than four decades. We are constantly striving to provide consumers with the expert guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate adheres to strict standards , so you can trust that our content is honest and accurate. Our award-winning editors and journalists provide honest and trustworthy content to help you make the right financial decisions. The content created by our editorial staff is truthful, impartial and is not influenced by our advertisers. We’re open about how we are in a position to provide quality content, competitive rates, and useful tools to you , by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for the promotion of sponsored goods and, services, or when you click on certain links posted on our website. Therefore, this compensation may influence the manner, place and in what order products appear in listing categories in the event that they are not permitted by law. We also offer mortgage, home equity and other home loan products. Other elements, such as our own proprietary website rules and whether the product is available within the area you reside in or is within your own personal credit score could also affect how and where products appear on this site. Although we try to offer an array of offers, Bankrate does not include specific information on every credit or financial products or services. Do you have a relative or friend who’s asked you to sign a co-signer for a car loan? Perhaps you’re struggling to be approved for an and need a co-signer? In either case it’s crucial to know that both the primary borrower and co-signer have legal responsibility for the auto loan payment. And both parties could face severe credit consequences should the loan falls into default. The upside is that the auto loan could also improve the credit score of both co-signers and the borrower’s health if handled properly. Key takeaway

Co-signing for a loan could affect your credit. In the event of default or late payments, it will negatively impact your credit and the primary lender’s. Your score may also decline by a few points since the initial credit check.

Co-signing an auto loan impacts the credit score of the co-signer. If you co-sign an auto loan your credit may be affected a bit due to the hard inquiry that is generated during the application process. There could be a slight drop on your score because your average age for your accounts will decline. Still, your credit could improve in the event that you pay on time for the loan because it adds positive history of payments to your credit report. But if the primary borrower cannot make payments and the co-signer isn’t able to fill in the gaps your credit score could suffer. Furthermore, you could have credit cards and loans in the future. When the loan reaches 30 days past due date, it can be reported through the lender to the major credit bureaus — Experian, TransUnion and Equifax and will affect your score on credit. If the loan remains in default and the the co-signer’s credit score suffers a much greater damage. The unfortunate thing is that repossessions and late payments remain in your credit file for as long as seven years, however the impact diminishes over time. How does having an auto loan co-signer affects the credit score of the principal borrower you refused an auto loan due to limited credit background? A co-signer with excellent credit is likely to increase your approval odds since the lender is less likely to take on risk. Therefore, you can be accepted for auto loan and begin to build a good credit when you pay on time for the loan. A co-signer could also aid you if it is insufficient due to previous financial mishaps. Payment history accounts for the 35 per cent of credit scores, therefore, keeping up with the auto loan repayments over the loan period could boost your score, provided you can manage your other debts with care. If you are a co-signer on a car loan Co-signing for a car loan can be risky and damage your credit health when it’s not properly managed. However, there are instances where co-signing a loan is logical If your friend or relative has a good employment record with a steady income, and you’re sure they’ll make timely loan payments. Your child is not a creditworthy person and has any credit history, and you want to help them establish credit from the ground up. You can afford to make the monthly payments in the event that the primary borrower is in debt. When to have co-signers on an auto loan A co-signer can aid you in getting an auto loan with a competitive interest rate. Here’s when it is ideal to have someone you know on board: You earn an income that is steady and you is able to pay for the monthly loan payment, insurance , and maintenance costs that will accompany the vehicle. You always make your payments punctually and have funds saved in case of a emergency financial situation. It’s difficult to be approved for an auto loan due to the lack on credit or previous errors. It’s a fact that if you’re thinking of co-signing a auto loan and/or asking someone to co-sign on your behalf, consider the risk before taking the next step. There are several essential factors to be aware of. These arrangements could be bad news for your credit and overall financial situation if there is a financial crisis, and loan payments aren’t paid punctually. Plus, valuable relationships can be damaged, which could quickly make the expense that come with co-signing an automobile loan or obtaining co-signers far outweigh the advantages.

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Written by Contributing Writer Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation’s leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances by providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.

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