Why You Shouldn’t Co-Sign For Someone Else
Be careful when a friend tells you to co-sign for him or her because you might be giving more than just a signature. Obtaining approval for credit cards can be very difficult for a person who’s had past credit issues or does not have any credit at all.
Need for a Co-Signer Because of an individual’s non qualifications
If someone you know or your loved ones could not obtain credit approval, there is a reason for that and that’s because their credit history or income shows they’re not responsible enough with credit to qualify. Creditors conclusion is based solely on facts and data about your friends or loved ones spending habits, character assessments.
There’s No Real Benefit to You | Why You Shouldn’t Co-Sign For Someone Else
The other borrower receives the benefit of the loan when you co-sign for a loan. If most or rather all the payments are paid on time, You might get a boost to your credit score. And if you can qualify as a co-signer, your credit score probably doesn’t need much help.
Payments on the Co-Signed Account Will Affect You
Why You Shouldn’t Co-Sign For Someone ElseWhy You Shouldn’t Co-Sign For Someone Else
Co-signing for someone makes you responsible for the debt as though it’s your debt alone. But you don’t receive the material benefit of what the debt entails. The lateness of the person you co-signed for is as though you were late in payment also. The late payment will be reported on your credit report like other accounts and have an impact your credit score which will affect your ability to get approved for your own accounts.
Your Level of Debt also Rises | Why You Shouldn’t Co-Sign For Someone Else
The level of debt you co-signed will also increase your debt to income ratio and affect as well your ability to get approved for your own credit cards and loans. If the debt affects your debt to income ratio and makes it too high, your loan applications may be denied.
By co-signing you’re accepting responsibility for the payments if your loved one doesn’t pay on time and If the payments become delinquent the creditor will come after you. With your level of debt rising, you can be sued for the debt and have a judgment entered against you.
The Relationship Could Suffer
If the co-sign agreement falls through It’s not just your credit that could end up being damaged. You can imagine what will happen to your relationship if the worst happens that is payments missed by the other borrower and it ruins your credit. Tread carefully when you’re mixing finances and relationships.
Opting out a Cosigned Loan Isn’t as Easy as Getting on It
That you regret being a co-sign doesn’t mean you can simply get out of it. Once a contract has been entered the only way to get your name off the account is for the other person to get a new account in his or her own name by improving their credit enough to qualify on their own. If you decide to co-sign with someone then go into it knowing there’s a possibility of your name being attached to the loan until it’s paid off.