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Does being a cosigner help build your credit as well as the other persons?

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Wiki User
March 02, 2011 11:37PM

The question here is not if it can hurt your credit (it might) but the question is if it can help it. YES! It can and will help your credit. It will help both the main buyer and the cosigners credit. With each good payment it will be reported on both persons credit report as a good payment, and will even help the persons with bad credit. Now either of the persons fails to make payment then it will affect both, so now see the other persons answer below: No! Being a co-signer is much more likely to damage your credit than help it. A co-signer is needed because the lender determines that the person asking for a loan is not likely to be able to pay it. Why would you want to put your money on the line if the BANK isn't willing to? It's hard to say no to friends or family who want you to cosign, but it's highly unlikely to turn out well. If they can't pay their bills (which is what the bank thinks is likely to happen) the bank will come after YOU. You promised to pay if your friend or relative didn't, and they can sue you, garnish your wages, and seize your assets if you don't do it. How much would you be willing to give up if your friend didn't pay their bills?

A better way to build credit is to get a secured credit card through Orchard Bank or a similar company (or your bank or credit union) and use it wisely. Charge something every month, but pay it off every month IN FULL. At the end of the year, you'll get the deposit back and be able to get a regular, unsecured credit card. You'll have built up a respectable amount of credit and good spending habits and will soon be eligible for auto and home loans and higher credit limits.

For more information, check out a radio show that I listen to all the time: www.daveramsey.com. He advocates no credit card use at all, but that's a little extreme. Still, you can find out more about why cosigning is a bad idea on that site.