Affects of co Signing a Loan on Credit Scores

Co-signing a loan can have a number of affects on one’s credit score, both negative and positive. Whether you are a co-signer for a student loan, personal loan or any other type of loan, it has a definite affect on the co-signers credit scores and credit rating. Here are some of the things to be aware of before making the decision to be a co-signer on a loan, no matter who it’s for.

Borrowing Power

Your borrowing power will be affected when you co-sign for a loan. It will be treated the same way as if you, yourself borrowed the money. If you should decide that you want to take a loan out for yourself before that co-signed loan is paid off, that loan will show up as a debt you personally owe.

Credit Report

Your outstanding debts account for 30 percent of your credit score. The formula used to figure your credit score considers you responsible for that debt. The co-signed loan will show up on your credit report whether the payments are made on time or not. If the payments are made on time, it will have a positive affect on your credit score, if not, it will have a negative affect, even if you’re not aware of the payments not being made on time.


If the co-signed loan is turned over for collection, it will appear on your credit report and lower your credit score, even if you pay it off as soon as you found out about it.

Amount of debt owed

The amount of debt you owe is one of the main factors that determine your credit score. The more debt you owe, the lower your credit score will be. Co-signing for a mortgage for someone adds the full amount of that mortgage to your outstanding debt, so the affect of that co-signed mortgage will have a dramatic affect on your credit score.

Chance of missed payments

If the signer of the loan fails to pay back the loan, a judgment can be filed against you by the lending institution  for the amount of the loan plus any interest charges. This can have an affect on your credit score as well as personal relationships.

Being aware and considering all of  the affects that co-signing a loan has your credit score may be very helpful to anyone who may be contemplating becoming a co-signer. It’s better to be safe then sorry, so it’s advisable to proceed with caution before doing this.