If you bring a co-borrower along for the ride, their credit score is considered during the auto loan eligibility process. Both of your credit scores are used to determine whether or not you qualify for a car loan, and both of your incomes are considered as well. Here’s what you need to know when you use a co-borrower to increase your odds of getting your next vehicle loan.
Your Co-Borrower’s Credit Score Does Matter
A co-borrower is mainly used to help you meet a lender’s income requirement for getting an auto loan. However, when you and your co-borrower apply for a car loan, both of your credit scores are used to determine eligibility. How they’re used, though, can vary depending on the lender. It’s likely that your co-borrower’s credit score needs to be good so you can qualify for the auto loan.
Most times, the lowest credit score is used to meet the lender’s credit score requirements. This means if your co-borrower has a worse credit score than you, it could mean a denial. Even if you have great credit, it may not matter. Occasionally, both credit scores are used, but it all depends on what your lender’s stipulations are.
If you have poor credit, and you’re hoping to increase your odds of getting approved, you need a cosigner, not a co-borrower.
Having a co-borrower means taking on a joint car loan with someone who has enough income to increase your chances of getting that auto loan approval. The better both your credit scores are, the better your chances of financing typically are.
How Auto Loan Co-Borrowers Are Useful
Co-borrowers add more income to your car loan application, unlike cosigners who help if you're facing credit score troubles.
If you’re having trouble meeting the income requirements of an auto lender, co-borrowers add their own income to help you meet these stipulations. If you both qualify, the car loan becomes a joint loan. On a joint auto loan, both of you are responsible for making the monthly payments, having full-coverage car insurance, and you get equal ownership rights to the vehicle.
Co-borrowers are almost always spouses or life partners because this is the only way your incomes can be combined. Essentially, you must prove that you have access to their income that's going to be used to pay for the vehicle.
Both your and your co-borrower’s incomes must be provable, too. This means having computer-generated check stubs that show year-to-date gross income. Many auto lenders require a minimum monthly income around $1,500 to $2,500 before taxes.
Many people use a co-borrower to qualify for larger car loan amounts, or they use their co-borrower's income amount to lower their debt to income (DTI) ratio when applying for an auto loan. This ratio is used to calculate how much of your income is available to pay for the loan. If most of your income is being eaten up by other debts and bills, then your co-borrower’s income could lower your DTI ratio to help you qualify for the loan and meet income requirements.
Co-Borrower Not the Solution for You?
If your poor credit score is the main motivation for having a co-borrower, you may want to consider using a cosigner instead. Cosigners can help by lending you their good credit score so that you can get the loan you need. But what if neither option is available to you?
One of the best ways to increase your car loan approval odds is by repairing your credit, however, this can take time. If you need an auto loan now but your credit score is getting in the way, consider subprime car financing.
Subprime lending is for borrowers with bad credit. These lenders consider more than just a poor credit score, and use the many different facets of your financial stability to determine your auto loan eligibility. Finding subprime financing means working with a special finance dealership that’s signed up with these lenders, and we can help you get the connections you need here at Auto Credit Express.
Over the last 20 years, we’ve created a nationwide network of dealers that are teamed up with bad credit car lenders, and we want to match you to one in your local area. Get started today by filling out our free auto loan request form.