{"id":19222,"date":"2022-11-14T13:42:00","date_gmt":"2022-11-14T19:42:00","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=19222"},"modified":"2024-11-13T13:15:25","modified_gmt":"2024-11-13T19:15:25","slug":"what-is-a-cosigner","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/credit-101\/what-is-a-cosigner.html","title":{"rendered":"What is a cosigner?"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice.<\/em> See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

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A cosigner is a person who applies for a loan alongside another borrower, who may be having trouble qualifying on their own. This means the cosigner agrees to take responsibility for the loan if the primary borrower fails to make their payments.<\/h2>\n<\/div>\n\n\n\n

Finding a lender who will issue a loan for someone with bad credit<\/a> or no credit history can be difficult. Getting a cosigner, such as a friend or family member, with better credit history may persuade a lender to approve the loan. A cosigner is a person who applies for a loan alongside another borrower, who may be having trouble qualifying on their own. By cosigning, you enter a contractual agreement to pay back the debt if the primary borrower fails to make the payments. <\/p>\n\n\n\n

Becoming a cosigner is a big responsibility and can affect your credit, for better or worse, depending on how reliable the primary borrower is with making payments. If you\u2019re considering cosigning a loan for someone, learn more about what it means to be a cosigner and how it can impact your financial history. <\/p>\n\n\n\n

How does cosigning work?<\/h2>\n\n\n\n

A cosigner is a person, often a family member or friend, who helps someone qualify for a loan or credit card by agreeing to help ensure payments are made. There could be many reasons why someone would need help qualifying, such as if they had past financial difficulties, are a student, or have minimal credit history.<\/p>\n\n\n\n

For example, someone buying their first car may have difficulty qualifying for a loan because of insufficient credit history<\/a> or a low income that doesn\u2019t meet the lender\u2019s qualifications. Lenders are often more likely to approve a loan when two people are responsible for the payments, especially if one is a highly qualified borrower.\u00a0<\/p>\n\n\n\n

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In this case, the primary borrower is most responsible for payments, but if they can\u2019t follow through for some reason, the cosigner needs to make sure payments are being made\u2014otherwise, both parties\u2019 credit may be negatively affected.<\/p>\n\n\n\n

The specific details of each loan or credit card\u2019s cosigning terms will vary by lender, so you\u2019ll need to do your research if you\u2019re interested in cosigning or getting help from a cosigner.<\/p>\n\n\n\n

Does cosigning build credit?<\/h2>\n\n\n\n

If you have minimal to zero credit history, getting a loan with the help of a cosigner can help you build credit<\/a> if you make on-time payments. Payment history impacts your credit score the most. Making consistent on-time payments can raise your score and prove to lenders you\u2019re a responsible borrower. <\/p>\n\n\n\n

If you\u2019re a cosigner, the loan and loan payment information will be added to your credit report as well. This means that on-time payments made by the borrower (or you) can also help boost your credit. <\/p>\n\n\n\n

However, as we mentioned, late payments and high credit utilization<\/a> can similarly hurt both the borrower\u2019s and cosigner\u2019s credit. It\u2019s important to keep this in mind and determine how well you trust someone when considering cosigning for them. <\/p>\n\n\n\n

Cosigning vs. co-borrowing<\/h2>\n\n\n\n

An additional party can serve as a cosigner or co-borrower for a loan alongside the primary borrower. In both cases, each party is legally responsible for the debt being taken on. Credit scores, assets, income, debt-to-income ratio, and other financial details are also considered for all parties involved during the application process. However, cosigning and co-borrowing aren\u2019t the same thing.<\/p>\n\n\n\n

Cosigning is allowed on a variety of financial products, including student, mortgage, auto, and personal loans. Some credit cards<\/a> may also allow a cosigner. As a cosigner on a loan, however, you don\u2019t make the payments unless the primary borrower fails to, nor do you receive the principal on the loan. Being a cosigner entails:<\/p>\n\n\n\n