Reasons Why You Should Never Cosign a Document for Someone Else

Jan 05, 2024 By Susan Kelly

Having a high credit rating is essential in today's economy. When deciding whether or not to approve an application, credit histories are used by financial institutions, service providers, landlords, and other service providers.

You probably won't have to worry about having your applications denied if you have a high credit score. However, you could be asked to act as a cosigner for a friend or family member who doesn't have as stellar of a credit record.

They Can't Qualify Without A Cosigner

Your loved one can't get credit approval because his credit history or income suggests he is not financially responsible enough to qualify. If a lender insists on a cosigner, it's because they don't think your family member will be able to make their payments on time.

Although your emotions may sway you to cosign, remember that a person's credit history and other objective factors are more robust indicators of their ability to repay a loan.

No Real Benefit to You

Cosigning a loan means that you are financially responsible for the loan, but the other borrower is the one who receives the money. They have access to the vehicle, the residence, or the credit card. There is a chance that your credit score will improve if you do this, but only if you make all of your payments on time. Your credit won't need much work if you have a cosigner willing to guarantee the loan.

Cosigned Account Payments Affect You

Your responsibility as a cosigner is the same as if the debt were yours alone, except that you won't directly profit from the loan's use. If a family member or friend is late with a payment, it's the same as if you were tardy.

You should expect the late payment to be recorded among your other account balances on your credit report. Your creditworthiness and access to credit will be negatively affected.

Your Debt Rises

Cosigning a loan or credit card will increase your debt-to-income ratio, making it harder to qualify for future loans or credit cards. All other debts, including the one you cosigned for, will be considered by creditors and lenders when evaluating your application for a credit card or loan. Your loan applications may be rejected if your debt-to-income ratio is too high.

The Burden of Defaults and Insolvency On You

If the other borrower doesn't pay their share of the loan, the creditors might go after you to cover the difference. If you fail to pay your bills, your creditors or debt collectors may take legal action, including filing a lawsuit against you. 2 To be released from responsibility for the debt, your loved one must have it dismissed in bankruptcy.

These 4 Options Beat Having a Cosigner

The good news is that you still have choices, even if getting a cosigner is exceptionally challenging. A total of four are provided below.


If you're in the market for a rental unit, you may hunt for a roommate or roommates who are already committed to the lease but might use some financial assistance. Someone who is going to be out of town for an extended period or who has to flick but is otherwise unable to get out of their lease may be willing to sublet to you.

Get A Cosigner

You might also use a cosigner service to help you get an apartment. They'll assure your landlord that they'll pay your rent if you can't, for a charge. Cosigner services need an application and, frequently, a fee to be considered for approval. The service will provide a cosigning certificate for your rental application if accepted. The landlord makes the final decision on whether or not to get a co-signer.

Consider Peer-To-Peer Lending

If you need a loan, but traditional lenders have turned you down, peer-to-peer lending may be worth looking into. There are two major players in this market: Prosper and Lending Club. Both lenders will do a credit check on you, but good credit isn't a must, and the money may be put to a wide range of uses.

Create Or Repair Your Credit

Borrowers with poor credit or no credit history need cosigners to get a loan. For either scenario, a secured credit card that reports to the three leading credit agencies may be an invaluable tool in building or repairing a positive credit history. You should only use the card for one minor purchase each month and pay it off in full by the due date each month.

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