Do Co-Signers Get Credit? How It Affects Your Score

When an individual seeks a loan but does not fully meet a lender’s eligibility criteria, a co-signer may be requested. A co-signer agrees to take on legal responsibility for someone else’s debt, providing additional assurance for lenders. This arrangement helps the primary borrower obtain approval or secure more favorable loan terms, especially with limited credit history or lower credit scores.

Co-signing on Your Credit Report

Co-signed accounts appear on the credit reports of both the primary borrower and the co-signer. This reporting occurs with Experian, Equifax, and TransUnion. The loan is reflected on the co-signer’s credit report as their own obligation.

The co-signer’s credit report details the account type (e.g., auto loan, mortgage, personal loan), original loan amount, current balance, and payment history. This applies regardless of whether the co-signer ever directly makes a payment, as their potential liability is recorded.

Lenders report payment history for both the primary borrower and the co-signer. If a primary borrower misses payments, the co-signer’s credit report will show the same delinquency status. The co-signer’s involvement is clearly noted, highlighting their legal commitment.

How Co-signing Affects Your Credit Score

Co-signing a loan can influence your credit score, with both positive and negative scenarios depending on the primary borrower’s payment behavior. When the primary borrower consistently makes on-time payments, this positive payment history can contribute favorably to the co-signer’s credit score. Payment history is a significant factor in credit scoring models, and a well-managed co-signed account can demonstrate responsible credit behavior.

A co-signed installment loan might also diversify the co-signer’s credit mix, which can be a minor factor in credit scoring. However, the entire loan balance contributes to the co-signer’s total outstanding debt, which impacts their credit utilization. This can increase their debt-to-income (DTI) ratio, potentially affecting their ability to secure new credit or leading to a temporary decrease in their credit score. Lenders consider the co-signed loan as part of the co-signer’s obligations when evaluating new credit applications.

Conversely, missed or late payments by the primary borrower will negatively affect the co-signer’s credit score, just as if the co-signer had missed the payment themselves. A single late payment, especially if it is over 30 days past due, can be reported to credit bureaus and remain on the credit report for up to seven years. Such delinquencies directly impact the co-signer’s payment history and can lead to a significant drop in their credit score. The initial hard credit inquiry when the loan is opened and a reduction in the average age of accounts can also lead to an initial dip in the co-signer’s score.

Understanding Co-signer Obligations and Credit Consequences

When you co-sign a loan, you become legally responsible for the debt if the primary borrower fails to make payments. If the primary borrower defaults, the lender can pursue the co-signer for the full amount of the debt, including interest and fees. The co-signer is held accountable for the entire debt, even if the primary borrower is unable or unwilling to pay.

If the primary borrower defaults or the account goes to collections, these negative events will be reported on the co-signer’s credit report, causing a substantial negative impact on their credit score. The co-signer’s credit history can reflect these derogatory marks for up to seven years, making it more challenging to obtain future credit. Lenders can initiate legal action against co-signers to recover the owed amount, which might include pursuing judgments.

Should a court issue a judgment, creditors can garnish the co-signer’s wages or seize assets to satisfy the debt. While federal and state laws limit garnishment, such actions severely impact the co-signer’s financial stability and creditworthiness. Even if the primary borrower files for bankruptcy, the co-signer’s responsibility for the debt often remains, and creditors can still pursue them for repayment. The co-signer’s credit and financial future are directly tied to the primary borrower’s actions.