A co-signer is normally a person you know, as in a family member or close acquaintance that is agreeable to share the accountability for repaying a loan if you are unable to make the payments. Usually a parent will co-sign for their child that has no credit rating yet or a bad credit score. This can be a good way for a young adult to start establishing a credit score when they are just getting started in life. Also, the good credit of the co-signer might aid someone with poor credit to get accepted for a loan that they would be denied if not.

No Credit History

When we become adults, we start out with zero credit score. Having no credit score is almost as bad as having a low one. This is because your credibility has yet to be established, which is not convenient if you are applying for a loan to purchase a car, house, or college education.

Begin Your Credit Score

One of the methods to start your credit rating early on in life, even if you are living with your parents, is to have your parents to have a utility bill in your name. No matter if you pay the bill with your own money or your parents pay, so long as the bill is paid on time and in full, it will be a good thing for your credit score. This will make it easier once you are ready to make a large purchase, like a first home, when you have a healthy credit score.

If You Have Bad Credit

When you have not paid your debts on time and your credit score slips down, and you need a loan, you may have to rely on a co-singer to assist you when applying for credit. If you are way in over your head in debt and have a bad credit rating it will be almost impossible to get approved for a loan. Under these circumstances a co-signer can assist you but they have to have a good credit score. A co-signer will also have to take over the outstanding payments that are owed on the loan if you cannot make payments for any reason.

No matter what your reasons for having bad credit, it is up to the lender to approve or deny you based on the facts of your credit report. As long as you know someone that has good credit and sufficient faith in your capacity to pay back the loan, you might have a good possibility to get the loan and begin raising your credit score. Therefore, a co-signer is a good way to begin or re-build good credit for you. Just ensure that you can make the payments on time or you will not be very popular with your co-signer.

William Wilkie writes about many personal finance topics, like how to Get Rid of Credit Card Debt and how to Get Out of Debt Fast.

  • Share/Save/Bookmark