How does co-signing a car impact credit? Part Of Financing a Car With a Co-Signer In this series Financing a Car With a Co-Signer Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct your own research and compare information at no cost to help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site come from companies that compensate us. This compensation can affect the way and where products appear on this website, for example for instance, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. Our mortgage, home equity, and other home lending products. However, this compensation will not influence the content we publish or the reviews appear on this website. We do not contain the entire universe of businesses or financial deals that might be open to you. SHARE Getty Images/Jupiterimages

3 min read published September 20 20, 2022

Written by Mia Taylor Written by Contributing Writer Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation's leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers to take control of their finances with clear, well-researched information that dissects complex subjects into digestible pieces. The Bankrate guarantee

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You have money questions. Bankrate has the answers. Our experts have been helping you manage your finances for more than four years. We strive to continuously give our customers the right guidance and the tools necessary to succeed throughout life's financial journey. Bankrate follows a strict policy, which means you can be confident that our content is honest and reliable. Our award-winning editors and reporters provide honest and trustworthy information to assist you in making the right financial choices. The content created by our editorial team is factual, objective, and not influenced through our sponsors. We're open regarding how we're in a position to provide quality content, competitive rates, and helpful tools to our customers by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products and, services, or by you clicking on certain hyperlinks on our website. So, this compensation can impact how, where and when products are listed in the event that they are not permitted by law for our mortgage or home equity products, as well as other products for home loans. Other factors, like our own proprietary website rules and whether a product is available in your region or within your own personal credit score may also influence the way and place products are listed on this website. Although we try to offer a wide range offers, Bankrate does not include specific information on every financial or credit product or service. Do you have a relative or friend who has asked you to co-sign for a car loan? Or maybe you are struggling to get approved for an and need a co-signer? In any event it's crucial to know that both the principal borrower and the co-signer are legally accountable for the auto loan payment. Both parties may be subject to grave credit penalties if the loan goes into default. However, the upside is that an auto loan can also boost the borrower and co-signer's credit health if handled properly. Key takeaway

Co-signing a loan can hurt your credit. Late payments and default will affect your credit and the primary credit score of the borrower's. Your score could also fall just a few points from your initial credit assessment.

What happens when co-signing an auto loan can affect the credit score of the cosigner. when co-signing for a car loan, your credit could be slightly affected by the hard inquiry generated in the process of applying. You could also see a slight drop in your credit score as you age, the typical age of your accounts will decline. But, your credit can improve when regular payments are paid on the loan as it can add positive history of payments to your credit report. However, if the principal lender isn't able to make the payments and the co-signer doesn't take over the burden your credit score could be affected. In addition, you may have credit cards and loans in the near future. Once the loan exceeds 30 days due date, it can be filed to the lender to the major credit bureaus -including Experian, TransUnion and Equifax -- and tank your score on credit. If the loan remains in default and the the co-signer's credit score suffers a bigger hit. The unfortunate thing is that late payments and repossessions stay visible on credit reports for as long as seven years, but the effect diminishes with time. What happens when you have the auto loan co-signer affects the credit of the principal borrower you denied an auto loan due to a lack of credit history? Getting a co-signer with stellar credit is likely to increase your odds of approval because the lender is less likely to take on risk. This means you'll be granted an auto loan and start building good credit when you make timely payments on the loan. A co-signer can also help you when your score is low due to past financial missteps. Payment history accounts for 35 % of the credit score, therefore, keeping up with the auto loan repayments over the loan period could boost your score, provided you can manage your other debts in a responsible manner. The right time to become co-signer on a vehicle loan Co-signing a car loan is risky and can harm your credit score if it isn't responsibly managed. However, there are situations where co-signing a loan makes sense for a friend or relative who has a solid employment history, consistent income and you're sure they'll pay on time loan payments. Your child has little to no credit history, and you'd like to assist them build credit from beginning to finish. You can afford to make your monthly payments if the primary borrower falls behind. The best time to get co-signers on the car loan A co-signer can help you get approved for an auto loan that has a reasonable interest rate. It is a good idea to invite an individual or a relative to the table: You earn a stable income and can afford the monthly loan payment, insurance , and the maintenance costs that be incurred by the car. You pay your bills on time and have money saved in case of a financial emergency. You can't get approved for a car loan because of the lack in credit score or past mistakes. It's a fact that if you're thinking of co-signing a car loan and/or asking someone to sign on your behalf, you should consider the risk before proceeding. There are several essential factors to consider. The two arrangements could mean negative consequences for your credit and overall finances in the event of financial difficulties or if loan payments aren't made punctually. Furthermore, important relationships could be strained, which could easily make the costs for cosigning an auto loan or obtaining a co-signer outweigh the benefits.

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Written by Contributing Writer Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation's leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.

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