Can it harm my credit if I co-sign a car loan for a friend?
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I have a friend that has bad credit, and the only way he can get a car loan is by me co-signing for him. I’m not too happy about it, but before declining him I want to fully understand the implications of co-signing on MY credit.
Thank you
Don’t Do it!
Have you seen the Suze Orman Show? “Never, ever, never, ever dare cosign for anyone“. It never turns out well.
Auto finance is what I do for a living. Co-signing is Never a good idea, and co-signing for someone with bad credit is especially bad. People with low credit scores have “gained” these scores because they don’t pay their debts back. This reflects back on their credit, and it will reflect on yours as well when they start paying late of defaulting on the loan.
When someone co-signs, his/hers credit report will show either a “J” for joint or a “C” for co-sign. Nobody will know who is the primary and who is the secondary signer, and so when your friend will be late on payments it will look exactly the same as you’re being late on your loans.
It goes without saying that it will damage your credit for many years.
Another aspect of co-signing is that it makes you equally responsible for the debt. So not only it is reported on both yours and your friend’s report, when he default on the loan (note that I wrote WHEN rather then IF) you can expect the collectors to come after you, because you are an easier target for them than your friend!
Even worse – if your name is on the car, you will be held responsible for insurance, registration, and parking tickets as well.
You could lose your driver’s license if the person racks up parking tickets or doesn’t properly maintain insurance and registration. If the vehicle is involved in an accident, you could be sued for the damages.
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