Asked in Co-signingCredit ReportsCredit
Would a cosigner's credit affect the application process?
July 16, 2011 12:55PM
Yes. A co-signer must be approved. The nature of co-signing requires the lender to make certain the co-signer has good credit and the resources to pay the loan. The borrower's credit isn't good enough to qualify for the loan and therefore the co-signer must be able to pay the loan if the borrower fails to make the payments.
A person who needs a co-signer has been determined by the lender to not have the standard credit qualifications to borrow money. They may not have the credit record or resources to convince the lender the loan will be paid. They are a poor risk. Therefore, the lender requires a co-signer who guarantees that the loan will be paid back.
That should be a red flag for the co-signer. It falls to the co-signer to have the income and they need to have the resources to pay the loan if the primary borrower defaults on the payments. Co-signing a loan may make the co-signer ineligible for qualifying for loans from other lenders since the loan they co-signed shows up as a liability on their own credit record.