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A cosigner is a person who applies for a credit product with someone who may not qualify on their own, and takes equal responsibility for the account. By getting a cosigner, you can strengthen your application and reassure the lender the loan will be repaid if you default. If you're offering to cosign a credit card or loan for a family member or friend, you're promising to make those payments if the other borrower doesn't follow through.
Are you considering a cosigner to get a credit product or cosigning a credit product for someone else? Keep reading to learn about what cosigners do and the pros and cons of signing your name on the dotted line.
What does a cosigner do?
A cosigner can help you qualify for a credit card, mortgage or other loan when you can't do so on your own. Cosigners share equal responsibility for the debt and agree to cover any loan or credit card payments and applicable fees if the primary borrower fails to pay. The debt account will appear on the cosigner's credit report, and depending on how the primary borrower manages the account, could help or hurt the cosigner's credit score.
Although the cosigner is legally obligated to make payments if the borrower can't, they have no rights to the loan proceeds.
Pros and cons of cosigning
If you can find a cosigner with a strong credit profile, you may be more likely to get approved for the credit card or loan you need. However, there are potential risks to consider – whether you're the cosigner or the borrower considering asking someone to cosign with you.
How to find a cosigner
If you need a cosigner, start by asking family and friends who are financially stable, have a steady source of income and have good or excellent credit for help. Explain to the person you're asking how the debt product will benefit you, why you need a cosigner and their role in the transaction. Being honest and upfront about their responsibility for the loan is crucial to maintaining a strong relationship once the documents are signed. If you’re the person being asked to cosign a loan or credit card, think very carefully about doing so and consider all the pros and cons first.
No luck getting a cosigner? You may need to improve your credit before applying for a loan or card. You can get your Experian credit report and credit score for free to know where you stand and what to focus on to boost your credit health. When you register, you'll also get real-time alerts of any activity on your credit reports and free insights on factors impacting your credit score.