What is the impact of co-signing for 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 aim is to assist you make better financial choices by offering interactive tools and financial calculators that provide objective and original content. This allows you to conduct your own research and compare data for free to help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this website are provided by companies that compensate us. This compensation may impact how and where products appear on the site, such as, for example, the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law for our mortgage, home equity, and other home loan products. But this compensation does not influence the content we publish or the reviews that you see on this site. We do not include the entire universe of businesses or financial offers that may be open 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. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to take control of their finances through providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. The Bankrate promises

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Co-signing a loan could affect your credit. In the event of default or late payments, it will impact your credit score and the primary lender’s. Your score could also fall just a few points from your initial credit check.

What happens when co-signing an auto loan can affect the credit score of the cosigner. If you co-sign a car loan your credit may be affected a bit by the hard inquiry generated during the application process. There could be an increase in your credit score as the average age of your accounts will decrease. Still, your credit could improve when you pay on time for the loan as it can add positive history of payments to your credit report. However, if the principal borrower is unable to pay and the co-signer fails to take over the burden, your credit score will be affected. Additionally, you may be able to get and credit card in the future. When the loan is 30 days past due date, it could be filed through the lender to the top credit bureaussuch as Experian, TransUnion and Equifax — which could affect your score on credit. If the loan remains delinquent and co-signers are involved, their credit score is hit, it will take a much greater impact. In the end, repossessions and late payments remain visible on credit reports for as long as seven years, however the effect diminishes with time. How having an auto loan co-signer impacts the primary borrower’s credit Were you refused an auto loan due to a lack of credit experience? A co-signer with excellent credit will likely improve your chances of approval since the lender is less likely to take on risk. Therefore, you can be accepted for the auto loan and start building solid credit scores as you make timely payments on the loan. A co-signer can also help you when your score is insufficient due to previous financial missteps. Payment history accounts for the 35 per cent of credit scores, making sure you are current with auto loan payments throughout the loan time frame could improve your score, provided you handle all your other debts responsibly. If you are a co-signer on a car loan Co-signing for a car loan is risky and can harm your credit score if it isn’t responsibly managed. However, there are instances when being a co-signer is logical If your friend or relative has a solid employment history that is consistent in income and you’re sure they will make timely loan payments. Your child is not a creditworthy person and has no credit history, and you’d like to assist to build credit from beginning to finish. You are able to afford the monthly payments in the event that the primary borrower is in debt. When to have a co-signer on an auto loan A co-signer can help you get approved for a car loan with a favorable interest rate. Here’s when it is ideal to bring a friend or relative with you: You have an income that is steady and you is able to pay for the monthly loan cost, insurance and maintenance costs that will be incurred by the car. You always pay your bills in time and have money stored in case of financial emergency. It’s difficult to be approved for an auto loan because of the lack of credit history or past errors. The bottom line Whether you’re considering co-signing a auto loan and/or asking someone else to co-sign your behalf, consider all the potential risks prior to taking the next step. There are many important aspects to consider. These arrangements could be negative consequences for your credit and overall financial situation if there is a financial crisis, and loan payment isn’t received in time. Furthermore, important relationships could be affected, which can quickly make the expense for cosigning an auto loan or getting co-signers outweigh the benefits.


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 editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to control their finances with concise, well-studied and well-researched content that breaks down complicated subjects into bite-sized pieces.

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