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7 Things About Cosigners You Must Know in 2023

Essential Things About Cosigners

7 Things About Cosigners You Must Know in 2023
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The Ins and Outs of Cosigners: 7 Must-Know Points

Usually, a cosigner is a family member or friend. Cosigning for a person on a loan is taking a big leap, which could damage your credit score if any of the payments are not made by the person who actually took out the loan. 

It takes a lot of trust and forethought to cosign, regardless of how much you love and care for the person you sign with. Being a cosigner does not only affect your credit score due to unpaid or missed payments, but also you are the one on the hook to pay the loan if your consignee doesn’t. 

What Is a Co-signing?

A cosigner is a legally obligated person, responsible for the payment of the loan, along with the primary borrower. If the borrower misses any payments or doesn’t pay the loan at all, the cosigner is the one obligated to pay back the full amount of the loan. 

Usually, the cosigner is a family member, such as your parents or another close family member, who commits to repaying the loan if the primary account holder doesn’t. A cosigner is a benefit for both borrower and the lender.

How Do You Find a Cosigner?

You need to start by asking your family or friends to be your cosigner. Make sure they are financially stable, have a good source of income, and also have fair or excellent credit. Explain to the person in detail why you are asking them to be a cosigner for you, how the personal loan or credit card is going to benefit you, and how their role as a cosigner is needed for this transaction. 

In order to maintain a smooth relationship you need to be honest and straightforward about the loan responsibilities of a cosigner when the documents are signed. If you decide to cosign for someone, first weigh the pros and cons and think of every aspect before doing so. 

What If You Can Not Find a Co-Signer?

If you are not lucky enough to get a cosigner, you should try to improve your credit score before applying again for a personal loan or card. You can check your credit score and credit report for free on Experian, Equifax, or Transunion

This can give you an overview of your credit health, and where you stand financially, so you can improve your score accordingly. You can also get insight into other factors when you register that impact your credit score. With registration, you also get alerts in real time for any activity that happens on your credit reports. 

Pros and Cons of Cosigner

A cosigner with a sturdy credit profile can increase your chances of getting approved for the loan or the credit card you need. At the same time, you should also consider the potential risks of being a cosigner for someone, or asking a person to be a co-signer for you. 


  • The odds of your approval increase: 

If you apply for a loan with a cosigner, the chances of getting approved for an unsecured credit card increase, even if you do not have a good credit score. And if you want a mortgage or a loan with a low-interest rate and more favorable terms, you have a high chance of getting approved with a cosigner. 

  • Help a friend or family member: 

If you pledge as a cosigner for your family or a friend with bad credit, you can help them get approved for a loan or credit card and also save them a lot of dollars in interest. You will also be a part of helping a person learn to be responsible with credit management. 


  • Risk of credit damage: 

The immediate person who takes the hit after the borrower if they missed or made any late payments is the cosigner. The credit bureaus will be reported the delinquency by the lenders which can cause your credit score to decrease and ends up straining the relationship with the borrower. 

  • Committing to pay the entire loan or credit card amount: 

The one who is liable for the missed payments is the cosigner if the borrower couldn’t make the payments on time. If you are a co-signer and are not able to settle the unpaid credit, the creditor could sue you. 

  • Removing from a cosigner is difficult: 

If you are a cosigner and want to remove yourself from the position of cosigner of a loan or credit card, the decision should be taken by the lender if the borrower is capable of paying the loan on their own.  The only other way you can be removed as a co-signer is by the borrower closing the loan after paying the whole amount. As for a mortgage loan, if the property is sold by the borrower, you can get released and as for other loans, read, and determine the terms under the fine print, and you can be released as a cosigner. 

  • Getting a credit card or a loan is difficult in the future: 

If you want to apply for a loan or credit card after being a cosigner, the lender could reject you due to the high current debt levels. This is what ultimately happens if your debt-to-income ratio is increasing and you apply for a mortgage loan. 

How Does Having or Being a Co-signer Affect Your Credit Score?

Your credit score isn’t affected just because you are a cosigner, but cosigning can affect your credit negatively if the primary borrower misses any payments. So, if you are a cosigner, these are some of the most common reasons your credit score can get affected.

1. Missed or Late Payments

A cosigner will be held responsible if the primary borrower missed any payments. If the payment is not paid at the right time even by the consignee, or if they have failed to pay altogether, the credit score could plummet. 

2. Owing More Debt 

If you have a cosigner, and they have a debt of their own it may add to yours and increase your debt on your credit report. The amount you currently owe will be increased and added to the credit score in the portion of “amounts owed.”

What Does It Mean When You Are a Co-signer for Someone?

If you accept to be a cosigner for someone, you are legally obligating yourself to repay the full loan amount in case the person who’s getting the loan has missed paying the loan. You are not just acting as a reference character for someone but pledging to pay the loan on their behalf. 

The lender has the right to use any collection of approaches against you that is used against the account holder to demand repayment of the entire loan if the borrower defaults. The lender can decide to sue you, and after a judgment, they can garnish your wages or bank accounts. Your credit score could be impacted because of any late or missed payments from the borrower. 

Prior to signing the agreement, a separate notice will be given by the lender to the cosigner. The notice carries out the following information:

  • You are asked to sign as a guarantee to this debt. You have to pay back the debt if the borrower can not. Think carefully before making a decision. You should be sure before you accept this responsibility and should be able to afford to pay the loan.  
  • If the borrower does not pay, you will be the one to pay the entire loan, late or missed payment fees, and collection costs, which is added to the full amount. 
  • The creditor without trying to collect the debt from the borrower first can collect it from you. 
  • The same methods from the collection used against the borrower can be used against you, like suing you and garnishing your income. Your credit record will include any of this unpaid debt. 

Since you are obligated to pay for a loan, it can be challenging to get approved for a loan yourself. When the lenders do not trust a particular borrower to pay the loan back or do not want to take the risk, they ask for a person to cosign their loan application. 

Frequently Asked Questions

  1. What happens if you are a cosigner?

Cosigning means you are legally obligated to pay the full loan. You are not just serving as a reference for someone, but promising to pay the loan yourself. You are held responsible immediately for any missed payments. 

  1. Is cosigning bad for your credit?

No, cosigning does not affect your credit score unless the borrower missed any payments.

  1. Who needs a cosigner?

A borrower needs a co-signer when they do not have a good or fair credit score, lack of credit history, or if the interest rate of the personal loan is very high.

Related Reads

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Cosign Only When You Are 100% Sure That It’s the Right Decision

Take a lot of time to work with the main account holder to ensure that there is a proper plan in place to pay off the whole debt, before committing yourself as a cosigner. You should also make sure to ask if there are options to release yourself from the responsibilities of a cosigner if the consignee shows progress in the history with on-time payments, and/or has reached the age of being an account keeper solely. 

But, there is nothing you can do, but accept that the debt of the consignee will remain on your credit report for years to prevent any negative consequences from affecting the credit scores of both parties, there should be a proper repayment plan set as a precaution. 

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