Can Cosigning for Someone Negatively Impact Your Credit?

I recently had this situation come up, so I thought I would write about. Naturally, if you’re close enough to consider cosigning for someone who is either too young to have good credit on their own and needs a guarantor for a loan or credit card, you want to help them out. But there are other things to consider about your own credit that may concern some people too.

Many people have the question “will cosigning for this person negatively impact my credit?” This often may be the determining factor on whether you help this person out to a better road in life! What you have to take a really hard look at is their reliability and their financial responsibility.

You will have to come to a firm agreement with this person that they will pay their bills on time for this loan or credit card, because if they default on the loan or credit card, or if they are late, this can directly impact your credit report. The reason for this is that you are taking full responsibility for paying this loan or credit card if they cannot pay it.

I saw this happen to someone very close to me in my family, the person she cosigned for totally defaulted on the loan, and it cost a lot of money for her, and there were some hard feelings between her and the person she cosigned for the loan. So this can definitely end up blowing up in your face if you and the person you are cosigning for don’t have a firm agreement and understanding in place of what the expectations are up front.

There’s a reason why they often say that friendship and family don’t mix well with money or business, and there can definitely be a delicate fine line here. If you can do it, and you trust the person wholeheartedly that you are cosigning for, you can really make a huge difference in their lives by cosigning for something for them.

This can start them on their way to building good credit, which can afford them the “American Dream” down the road. Whether you’re starting them off as a young person building credit, or you are helping someone who’s had some bumps along their financial road and has bad credit, to rebuild good credit (as long as they have good intentions), it can be really rewarding to know that you can share that kind of good fortune and offer your little slice of help to the American economy by helping someone get on their feet.