Want to keep – or build – a great credit score? Think twice before co-signing for a loan. When you co-sign a loan, you’re essentially giving someone else access to your credit-worthiness and you’re doing so by agreeing to cover the principle – as if it were your loan all along!
"If someone asks you to co-sign for a loan it’s likely because a bank has denied their credit application,” says credit expert John Ulzheimer. “Asking for a co-signer is their way of making the bank more comfortable because they’ll now have someone who is actually creditworthy on the hook for payment. You co-signing for a loan is really no different than you applying for the loan on your own. Not only will the debt show up on your credit reports but any mismanagement of the account will also blow back on your credit scores.”
Don’t take lightly the decision to co-sign on a loan, because the risks to you, your bank account and your credit are really high!