If you’ve been asked to be a cosigner for someone, you may be wondering “how does being a cosigner affect your credit?"
What Does a Cosigner do for a Car Loan?
The first thing you need to understand is what a cosigner does on a car loan. A cosigner is there to help the primary borrower qualify for an auto loan. Many times, these car buyers have little to no credit, and need to “borrow” your good credit. Once you agree to cosign the loan, you won’t have any ownership rights to the vehicle, but you’ll be responsible for the loan in the event the primary borrower defaults.
Remember, a cosigner isn’t the same as a co-borrower. Co-borrowers are generally a spouse, and share equal ownership rights to the car. A cosigner has no rights to the vehicle, but is still responsible for the loan and obligated to make payments if the primary borrower can’t.
In order to be a cosigner, you’ll need to meet the lender’s basic requirements. These two things include:
- Good credit – Lenders want a cosigner to have great credit. Usually, this means a FICO score of 700 or more.
- Stable income – Stability and ability to pay are important to lenders, especially when it involves cosigners. What the lender requires will vary, but they’ll make sure your debt to income ratio can handle an additional loan.
The Bottom Line
It’s important you know what you’re getting yourself into before agreeing to cosign. You’ll be putting your credit on the line for the borrower, and if they miss a payment or one is late, it’ll affect your credit score and you may have to pay.
On the flip side, if you have a cosigner and are looking to find a dealer to work with, Auto Credit Express can help. We can connect you with a dealership that specializes in getting borrowers in challenging credit situations approved. Our process is free and puts you under no obligation, so you have nothing to lose. Go ahead and complete our simple and secure online request form to get started today.