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Does Cosigning Affect Your Credit Score?
July 1, 2025
Quick Answers
When you cosign for a loan, it appears on your credit report as your own debt, which can impact your debt-to-income ratio and your ability to qualify for new credit.
If the primary borrower consistently makes on-time payments, this positive payment history can help improve your credit score.
Conversely, any missed or late payments by the primary borrower will negatively affect your credit score, as you are equally responsible for the debt.
What Does It Mean to Cosign?
Cosigning a loan means you agree to share legal responsibility for repaying a debt with another person, known as the primary borrower. By adding your name to the loan application, you are essentially vouching for the borrower's ability to pay. This action makes you equally liable for the full loan amount should the primary borrower default.
This financial arrangement is reflected on your credit report, just as it is on the primary borrower's. Consequently, the payment history of the loan directly influences your credit score. On-time payments can contribute positively to your credit history, while any late or missed payments will be reported for both parties and can negatively impact your score.
How Cosigning Can Affect Your Credit Score
Cosigning a loan is a significant financial commitment that directly intertwines your credit history with the borrower's. This decision can influence your credit score through several distinct stages.
- The Initial Credit Check: When the loan application is submitted, the lender performs a hard inquiry on your credit report. This can cause a small, temporary dip in your credit score.
- Increased Debt Load: Once the loan is approved, it appears on your credit report as a new debt obligation. This increases your overall debt, which can affect your debt-to-income ratio and credit utilization.
- Ongoing Payment History: The primary borrower's payment activity is reported on your credit file. Consistent, on-time payments can add a positive history to your report, but the opposite is also true.
- The Risk of Default: If the primary borrower pays late or defaults, those negative marks appear on your credit report as if they were your own, potentially causing significant damage to your score.
How Much Will Cosigning Affect Your Credit Score?
When you cosign a loan, you're taking on significant financial responsibility that can directly impact your credit. Here are the key ways your credit score could be affected.
- New Debt Responsibility. The loan appears on your credit report, increasing your overall debt load. This can raise your credit utilization ratio and potentially lower your score.
- Payment History Impact. If the primary borrower pays late or defaults, it negatively affects your credit history. Consistent on-time payments, however, can have a positive effect over time.
- Credit Inquiries. The lender performs a hard inquiry on your credit when you agree to cosign. This can cause a small, temporary dip in your credit score.
How You Can Avoid Cosigning Affecting Your Credit Score
Set Clear Expectations
Establish a formal agreement with the primary borrower outlining payment duties and consequences for missed payments. This proactive communication helps prevent misunderstandings down the line, protecting both your credit score and your personal relationship from financial strain or unexpected delinquencies on the account.
Monitor the Loan Account
Request online access or monthly statements for the loan. By actively monitoring the account's payment history, you can quickly identify any late payments. This allows you to intervene before the delinquency is reported to credit bureaus, thereby safeguarding your credit score from negative impacts.
Inquire About Cosigner Release
Before committing, ask the lender if they offer a cosigner release option. This provision may allow you to be removed from the loan after the primary borrower makes a specific number of on-time payments, completely ending your financial responsibility and risk to your credit.
Choose the Right Card to Cosigning
Because your credit score is a dynamic number based on your ongoing financial habits, it is always possible to improve it. An expert guide suggests most people see meaningful changes within three to six months of consistent, positive behavior.
- Monitor your credit reports. Obtain free reports from all three major bureaus to identify and dispute inaccuracies, detect potential fraud, and track your progress.
- Establish automatic bill payments. Your payment history is the most significant factor in your score, so setting up automatic payments ensures you never miss a due date.
- Reduce your credit utilization ratio. Aim to keep your balance below 30% of your total credit limit by paying down debt or requesting a credit limit increase.
- Become an authorized user. Being added to someone's credit card who has a strong payment history and low utilization can help boost your own score.
- Limit hard inquiries. Avoid applying for too many new credit accounts in a short period, and use prequalification tools when possible to prevent temporary score drops.
The Bottom Line
Cosigning a loan makes you equally responsible for the debt. Any missed payments by the primary borrower will negatively affect your credit score, a decision with significant financial implications.
Frequently Asked Questions
Can cosigning help my credit score?
Yes, it can. If the primary borrower consistently makes on-time payments, this positive history is reflected on your credit report and can help improve your score.
How do I remove myself as a cosigner from a loan?
You can be removed through a cosigner release clause, if available, or if the primary borrower refinances the loan solely in their own name.
Does cosigning affect my ability to get a loan?
Yes, the cosigned debt is included in your debt-to-income ratio. This can make it more difficult for you to qualify for your own new credit.
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