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How does co-signing a car affect 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 mission is to help you make better financial decisions by offering interactive financial calculators and tools that provide objective and original content. This allows users to conduct research and compare information at no cost and help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site come from companies that pay us. This compensation can affect the way and when products are featured on this website, for example for instance, the order in which they be displayed within the listing categories and other categories, unless prohibited by law for our loans, mortgages, and other home loan products. However, this compensation will affect the content we publish or the reviews that you read on this site. We do not include the vast array of companies or financial offerings that could be accessible to you. SHARE Getty Images/Jupiterimages

3 minutes 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. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the beginning of 2021. They are dedicated to helping their readers to control their finances through providing clear, well-researched information that dissects complex subjects into digestible pieces. The Bankrate promise

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If you have questions about money. Bankrate can help. Our experts have been helping you master your money for over four decades. We are constantly striving to provide consumers with the expert advice and tools needed to make it through life’s financial journey. Bankrate follows a strict , so you can trust that our content is truthful and reliable. Our award-winning editors, reporters and editors produce honest and reliable content that will help you make the right financial choices. The content created by our editorial team is objective, factual, and not influenced through our sponsors. We’re transparent about how we are able to bring quality information, competitive rates and useful tools to you by explaining how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for placement of sponsored products and, services, or when you click on certain links posted on our website. This compensation could impact how, where and when products are listed and categories, unless it is prohibited by law. We also offer mortgage or home equity products, as well as other products for home loans. Other factors, like our own website rules and whether a product is available within your area or at your personal credit score may also influence the way and place products are listed on this site. Although we try to offer the most diverse selection of products, Bankrate does not include information about each credit or financial item or product. Are you the parent of a or friend who’s asking you to co-sign for a car loan? Perhaps you’re struggling to be accepted for an auto loan and require co-signers? In any event it’s essential to realize that both the primary borrower and co-signer have legal responsibility for the auto loan payments. The two parties could be facing severe credit consequences should the loan falls into default. However, the upside is that an auto loan could also improve the credit of the co-signer as well as the borrower’s health if handled properly. What’s the most important takeaway

Co-signing co-signing a loan can hurt your credit. In the event of default or late payments, it will negatively impact your credit as well as the primary credit score of the borrower’s. Your score may also decline just a few points from your initial credit report.

How co-signing an auto loan affects the co-signer’s credit When co-signing for a car loan, your credit could be affected by the inquiry made in the process of applying. There could be a slight drop of your credit rating since your average age for your accounts will decrease. But, your credit can improve in the event that you pay on time for the loan since it will add positive payment history to the credit report. But if the primary borrower is unable to pay and the co-signer doesn’t fill in the gaps the credit score of the co-signer will take a hit. In addition, you may have and credit cards in the future. After the loan reaches 30 days past due date, it could be filed through the lender to the major credit bureaus — Experian, TransUnion and Equifax and will affect your score on credit. If the loan is not paid in full and the the co-signer’s credit score will take a much greater impact. In the end, repossessions and late payments will remain visible on credit reports for as long as seven years, but the effect diminishes with time. How does having the auto loan co-signer can affect the credit of the principal borrower you refused an auto loan due to limited credit background? Getting a co-signer with stellar credit will likely improve your chances of approval since the lender is less likely to take on risk. Therefore, you can be granted an auto loan and begin to build a good credit when you make timely payments on the loan. A co-signer could also aid you if it is lower due to financial mistakes. Pay history makes up the 35 per cent of credit scores making sure you are current with auto loan repayments over the loan term could help boost your score — assuming you manage all other debts in a responsible manner. When to be a co-signer on a car loan Co-signing a car loan can be risky and affect your credit score when it’s not properly managed. However, there are instances when being a co-signer makes sense: Your relative or friend has a good employment record, consistent income and you’re certain that they’ll make timely loan payments. Your child has no credit history, and you want to help to build credit from the ground up. You can afford to make the monthly payments if the primary borrower has a problem. When to have a co-signer on a car loan A co-signer could assist you in getting approved for a car loan with a favorable interest rate. It is a good idea to have a friend or relative on board: You earn an income that is steady and you is able to pay for the monthly loan payment, insurance , and maintenance expenses that come with the vehicle. You consistently make your payments punctually and have funds stored in case of financial crisis. You can’t get approved for a car loan because of a lack in credit score or previous mistakes. The bottom line Whether you’re considering co-signing the car loan or asking someone else to co-sign on your behalf, consider all the potential risks prior to taking the next step. There are many important aspects to be aware of. The two arrangements could mean negative consequences for your credit score and overall financial situation if there is a financial crisis or if loan payment isn’t received punctually. Furthermore, important relationships could be strained, which could quickly make the expense for cosigning an auto loan or having 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 writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to manage their finances through providing clear, well-researched information that break down complex topics into manageable bites.

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