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What does co-signing a vehicle affect 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 better financial choices by providing you with interactive tools and financial calculators, publishing original and objective content. We also allow you to conduct research and compare information at no cost – so that you can make informed financial decisions. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this website are provided by companies that compensate us. This compensation may impact how and when products are featured on the site, such as such things as the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. Our loans, mortgages, and other home loan products. But this compensation does not influence the information we provide, or the reviews you read on this site. We do not include the vast array of companies or financial offers that may be available to you. SHARE Getty Images/Jupiterimages

3 minutes 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 writing and editing for Bankrate since the beginning of 2021. They are committed to helping readers to manage their finances with clear, well-researched information that breaks down complicated topics into bite-sized pieces. The Bankrate promises

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They ensure that what we write ensures that everything we publish is accurate, objective and trustworthy. Our loans reporter and editor are focused on the areas that consumers are concerned about the most — the various types of loans available, the best rates, the top lenders, how to pay off debt and much more. So you’ll be able to feel secure when making a decision about your investment. Integrity in editing

Bankrate has a strict policy standard of conduct, which means you can be confident that we’re putting your interests first. Our award-winning editors and journalists produce honest and reliable content that will help you make the right financial decisions. Our main principles are that we value your trust. Our goal is to provide our readers with truthful and impartial information. We have standards for editorial content in place to ensure that this happens. Our editors and reporters thoroughly check the accuracy of editorial content to ensure that the information you’re reading is true. We have a strict separation with our advertising partners and the editorial team. The editorial team of Editorial Independence Bankrate does not receive compensation directly by our advertising partners. Editorial Independence Bankrate’s editorial team writes on behalf of YOU – the reader. Our aim is to offer you the best advice to help you make smart financial decisions for your personal finances. We adhere to strict guidelines in order in order to make sure that the content we publish is not affected by advertisements. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly checked for accuracy to ensure its truthfulness. So when you read an article or a report you can be sure that you’re getting credible and dependable information. How we earn money

You have money questions. Bankrate can help. Our experts have helped you understand your money for more than four years. We strive to continuously give consumers the professional guidance and the tools necessary to make it through life’s financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our content is truthful and reliable. Our award-winning editors, reporters and editors produce honest and reliable content to help you make the right financial choices. Our content produced by our editorial team is objective, factual, and not influenced from our advertising. We’re transparent about the ways we’re capable of bringing high-quality content, competitive rates, and useful tools for you , by describing how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products or services, or through you clicking certain links posted on our site. Therefore, this compensation may influence the manner, place and in what order items are listed and categories, unless it is prohibited by law. This is the case for our mortgage or home equity products, as well as other home loan products. Other factors, like our own rules for our website and whether or not a product is available within your region or within your personal credit score could also affect how and where products appear on this site. We strive to offer an array of offers, Bankrate does not include specific information on every financial or credit item or product. Are you a family member or friend who’s asked you to co-sign a car loan? Or maybe you are having trouble getting approved for an and need a co-signer? In any event, it’s important to understand that both the principal borrower and co-signer are legally responsible for the auto loan payment. The two parties could be facing grave credit penalties if the loan falls into default. However, the upside is that an auto loan could also improve the borrower and co-signer’s credit health if managed responsibly. The most important thing to remember is

Co-signing for a loan can affect your credit. In the event of default or late payments, it will impact your credit score and the primary borrower’s. Your score may also decline just a few points from your initial credit assessment.

What happens when co-signing an auto loan impacts the credit score of the co-signer. If you co-sign for a car loan your credit score could be affected by the inquiry made in the process of applying. You could also see some slight declines on your score as you age, the typical age of accounts will decline. Still, your credit could improve if regular payments are paid on the loan since it will add positive history of payments to your credit report. But if the primary borrower cannot make payments and the co-signer fails to take over the burden your credit score could be affected. In addition, you may have and credit cards in the near future. When the loan exceeds 30 days due, it may be recorded by the lender to the three major credit bureausincluding 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 an even more significant damage. The unfortunate thing is that late payments and repossessions stay in your credit file for as long as seven years, but the impact decreases over time. How having the auto loan co-signer impacts the primary borrower’s credit Were you denied an auto loan due to a lack of credit background? Getting a co-signer with stellar credit could boost your odds of approval because the lender is less likely to take on risk. This means you’ll be approved for an auto loan and begin to build a solid credit scores as you make timely payments on the loan. Co-signers can also assist you if it is insufficient due to previous financial mishaps. The amount of your payment history is 35 % of the credit score therefore, keeping up with the auto loan repayments over the loan time frame could improve your score, assuming you handle all your other debts with care. The right time to become a co-signer on a car loan Co-signing a car loan could be risky and harm your credit score when it’s not properly managed. However, there are instances where co-signing a loan is sensible If your friend or relative has a proven track record of employment, consistent income and you’re confident that they’ll pay on time loan payments. Your child has no credit history and you’d like to help them establish credit from the ground up. You can afford to make your monthly payments if the primary borrower has a problem. If you need a co-signer on an auto loan A co-signer can aid you in getting a car loan with a favorable interest rate. Here’s when it is ideal to have someone you know to the table: You earn an income that is steady and you can afford the monthly loan cost, insurance and maintenance expenses that be incurred by the car. You consistently make your payments on time and have money to hand in the event of a financial crisis. It’s difficult to be approved for a car loan because of the lack of credit history or prior mistakes. The bottom line Whether you’re considering co-signing on a car loan and/or asking someone to sign on behalf of you, think about the risk before proceeding. There are a variety of important factors to be aware of. Both arrangements can mean negative consequences for your credit and your overall financial situation if there is a financial crisis or if loan payments aren’t made on time. Furthermore, important relationships could be strained, which could easily make the costs that come with co-signing an automobile loan or having co-signers outweigh the benefits.


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 from late 2021. They are committed to helping readers feel confident to take control of their finances by providing clear, well-researched information that break down complex topics into digestible chunks.

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