How much will co-signing a loan affect my credit score?

This is for our daughter, we have no problem co-signing as she is extremely responsible and cares as much about her credit as we do ours. We have an excellent score...799...but she is consolidating student loans which total about $35,000. Our income is around $70,000 and I'm afraid with that kind of debt we won't be able to buy anything. She already has a loan approval for 10%, our co-signing will just improve her interest rate. Any suggestions? Thanks!

Co-signing a loan that large would be the same as borrowing it yourself (since that's what a co-signer is doing). It will reduce your credit score though I don't know by how much.

My suggestion is that you NOT co-sign the loan. It has NOTHING to do with how responsible or how caring your daughter is. I'm sure that she is a fine young woman.

Here's the deal: events can occur, beyond anyone's anticipation, beyond anyone's expectation or prediction. Any number of events can occur that would cancel her ability to repay the loan from her income. Illness, accident, theft of identity, lots of things.

Let's play it this way. Since she is completely reliable and responsible, you and your spouse pay off the $35,000 in loans, using money that you get from your choice of sources. Refinance the home, etc. Your daughter signs a promissory note to pay you back $35,000 at 9% simple interest (or whatever the lower rate would be). Then your credit score is unaffected and you have a nice interest-bearing note. Can you afford to do that?
If you cannot afford to do that, then you should not co-sign the loan.

It will tie up your credit. A loan that big will take a looooong time to pay off. Don't co-sign if she already has approval on her own.

It will be as if you took on the loan yourself. With that much insecured debt, you'll be hard pressed to get any additional credit.

If she's already approved without a co-signor, I would NOT co-sign just to get her a lower rate. If you want to help her out, kick her a few $$$ a month to make up a bit of the difference in the payments.

She may be responsible, but she also needs to learn to be self-supporting now. If things to to hell in a hand-basket, you'll be left holding the bag on the loan. If you have any problems making those payments, you risk having your tax refunds taken along with other misery.

It will tie up your credit as if you signed for the loan yourself, so it will stop you from getting other items.

Plus even if she is good, bad things can still happen in life. When bad things happen, this car is your responsibility, period.

She is consolidating student loans? Meaning she is out of college? Meaning she is an adult.....right? So....umm....WHY are you trying to save her some interest points? I get the point of "wanting to help" but your job of parents stopped years ago back when she was 18. She's an adult now, she needs to live like an adult and pay like an adult to understand what it means to be an adult so she can later turn into adults like yourself. Not a spoiled brat that always has to lean on someone to make it through.

Like they say.....give a man a fish today and he eats today, teach the man to fish and he'll eat for a life time.

Stop the helping of today and help for her life time instead. Wisdom goes much farther than cash ever will.

As long as she makes her payments on time it should have no effect on you. Just beware that if she misses payments or is late with payments it will effect you. I guess it depends on how mature your daughter is, and how much you trust her.

i think co signing would ruin your credit but im not really sure

If you're co-signing a loan for your daughter, essentially you're on the hook for the debt if she defaults. The lender can come after you for the full debt if she cannot or will not pay. You're guaranteeing the repayment of the debt as added security for the lender; incentive for them to go ahead and issue the loan proceeds to your daughter and take on a risk that the lender wouldn't take without your signature of guarantee.

Now, as this is your daughter and it's for student loans, you may be set on helping her no matter what. However, should she fall on hard times, you will be responsible for the debt if she ends up defaulting. No implication that it will happen, but people do fall on hard times, every day.

Depending upon what state you live in, the laws vary but generally speaking, if the loan goes into default for non-payment the lender can come after you for the debt, place derogatory notations on your credit reports, sue you, garnish your wages and property, and so forth.

Consider carefully before co-signing, even though it's your daughter and you certainly want to help her. You are just as liable for the debt as she is if you co-sign. Even if she pays perfectly on time, each month like clockwork, you may find yourself in a bind if you apply for loans for yourself, because that loan will be seen as one of your obligations. Any other lender will be able to see that you're legally liable for this debt and it can affect your ability to take out credit for yourself.

Something you might do to hedge your bets if you do cosign:

Before you sign, make a written agreement with the lender that they will notify you in writing if the primary borrower (your daughter) misses a payment. This way, you find out about any repayment issues quickly and you can step in to prevent default and before it snowballs into a bigger problem.

Bottom line: Co-signing is almost like taking out the loan yourself. Although she would be the primary borrower responsible for payment, if she defaults then the lender puts you, the co-signer, in the crosshairs for repayment and can take legal action against you to satisfy the debt.

It's hard to say whether your FICO score would go up or down by having this additional debt added to your credit inventory. On one hand, her prompt payments don't do much for your score, but if she defaults and they come after you and you can't pay, then you, too might see your credit score tank with derogatory notations. Load your credit portfolio with too much debt and other lenders may turn you down despite a good credit score and good payment history, seeing the additional large load of debt as too high of a risk to give you credit.

How much better an interest rate will your daughter get by having a co-signer? If it's one or two percentage points, it may not be worth it; it may be more worthwhile for you to stay clear of co-signing and just have an agreement with her that you'll assist if she runs into trouble - this way, you're free and clear to help her without the legal snafus that can ensue with being a co-signer. She could also put extra into her principal payments each month to pay down the loan more quickly and thus shave interest and years off the loan.

If she'd get an interest rate of 2% with a co-signer as opposed to 10% without, then perhaps co-signing would be a more effective way to help her.

lt could have an effect if you try to borrow money down the road. lenders are going to raise an eyebrow when they see that you could be on the hook for a debt that big. not to mention if anything were to happen to her, or she loses her job, your going to have to pay that. i don't think that its worth the risk to help her get a lower interest rate then 10%. did the person who is consolidation the loan for her warn her of the risks of it being extremely hard to get a forbearance or discharge in case of hardship? also if she consolidates now, shes locking in the intrest rate, which keeps her from getting a lower one if rates goes down again?

It will probably have a minor effect, as long as you do not run out and apply for muliple credit cards/ loans it should be okay.

The problem you run into is that if for some reason the loan is defaulted on, you would be the secondary person and responsible for the balance. That would have a negative affect on your credit.

By co-signing you are agreeing to take on the whole debt in terms of debt score. If your daughter could not pay back the debt you would be fully responsible. I wonder why you have a loan of 10%...this must be a bank loan, because student loans by the government are at least half that. Maybe shop around some more....

Are these private or federal loans? If they are federal loans credit won't be a factor in cosolidating and you won't have to co-sign. She will also get a much lower rate. If they are private loans that is a different story. If you co-sign for her, it is viewed as debt by you as well and well affect your debt to income ratio. However they are student loans and are not generally looked at like the typical loan by creditors.

If she makes the payment on time every time, you will be fine. But I have to wonder, if she already has a loan approved in her name only at 10% why are you considering this?

it shouldnt have too much of a negative impact but one piece of advice is have HER pay the bill and save copies of all checks on the co-signed debt, once you have 6 consecutive months of cancelled checks showing that SHE has paid it on time, it will not be held against you when applying for new credit. Hope this helps

It will definately affect your credit because it will note that you are responsible for the debt if the main account holder defaults.

If the payments are made on time every time, it shouldn't matter.

Any major purchase, like getting a mortgage, you'd need to show 6-12 months of cancelled checks from your daughter and you can remove that account from your personal qualifying.

The dangerous part is that when consolidating student loans, you make one payment, but it often still shows as multiple underlying accounts. One missed payment can hit you multiple times on your credit. So that's the real risk.

But if you're 1000% confident she'll make the payments, go for it. But this loan will be out there for decades, as I assume that she'll be taking at least a 15-20 year term, so be careful.

But simply co-signing a loan, especially a long-term installment loan like this, won't have a direct negative impact on your scores.

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