What It Means
A cosigner is someone who agrees to share legal responsibility for a loan or credit account with the primary borrower. If the primary borrower fails to make payments, the cosigner is fully liable for the debt. Cosigning is commonly used when the primary borrower has insufficient credit history or a low credit score to qualify on their own. The loan appears on both the cosigner's and borrower's credit reports, and both positive and negative payment history affects both parties' credit scores. Cosigning carries significant financial risk - if the borrower defaults, the cosigner's credit is damaged and they may be pursued by collectors. Financial experts generally caution against cosigning unless you can afford to repay the entire loan.
Frequently Asked Questions
Does cosigning affect your credit score?
Yes. The account appears on your credit report. Late payments by the borrower will damage your credit. The additional debt also increases your debt-to-income ratio, potentially affecting your ability to borrow.
Can you remove yourself as a cosigner?
Some loans allow cosigner release after the borrower makes a certain number of on-time payments and meets credit criteria independently. Otherwise, refinancing is the primary way to remove a cosigner.