It’s no secret that an auto loan can be a great tool for rebuilding bad credit. Sometimes, when you’re struggling with poor credit, you can’t get a car loan without a cosigner. So, even though you’re getting the loan, it’s partially based on the cosigner’s credit score. But, who gets the boost when your responsible loan payments start paying off?

The Significance of Cosigners

To understand how financing affects credit, first you need to know how cosigning for a car works. If your lender requires a cosigner on a car loan it means that you’ve met their minimum qualifications, but your credit may have been just a bit too low. So, instead of flat-out turning you down, you’re asked to get a cosigner.

Does a Cosigner Need Good Credit?

Cosigners must meet certain requirements in order to successfully help you get auto financing. Typically, this means having a qualifying minimum income like you, but with a much higher credit score. Cosigners usually need to have a score of at least 700 or better in order to qualify.

Whose Credit is Affected?

Your cosigner’s credit is used to get you the auto financing. But, as your cosigner, they’re putting more on the line for you than just their good credit. In the event that you can’t or won’t pay, a lender will turn to your cosigner to collect payments. If you default, a lender can even go after your cosigner after the car has been repossessed. Even before that happens, both your credit and that of your cosigner will be affected. Since your cosigner’s credit is tied to your loan, neglecting your financial responsibilities will bring down their score too.

Giving Good Credit Where it’s Due

Who Gets the Credit on a Cosigned Car Loan?On the other hand, if you make all your loan payments on time and in full, it begins to have a positive impact over the course of your loan. By doing this, you can improve not only your credit, but your cosigner’s, as well. Your payment history is the biggest factor that makes up your credit score, but it takes time to build.

As you can see, it’s not a question of whose credit improves, because your car loan will impact both of you. Be careful, because just one late car payment can have a big negative impact much more quickly than your positive payments. Because of this, it’s important that you and your cosigner discuss the pros and cons before entering into a car loan, and have a plan in place if you fall behind on your payments.

Cosigning Can Be Good for Both Parties

Needing a cosigner isn’t the worst thing that can stand in your way when you need a car loan. It also isn’t something to be entered into lightly because of the impact your actions could have on someone else’s credit. So, if you need a car loan, but bad credit is weighing you down, consider speaking with a close friend or family member about becoming a cosigner. Even if it’s not required, having a cosigner with better credit can help you get a better interest rate.

If you’re ready for financing but don’t know where to turn, look to Auto Credit Express. We work with a nationwide network of special finance dealers that have the lenders available to help people that are struggling with credit issues. Go ahead and fill out our easy online auto loan request form, and we’ll get to work matching you with a local dealer today!