Co-signers: Will Their Good Credit Help You?

by : Tom Ambrozewicz

A co-signer on any loan application can either be a blessing or a financial nightmare. This can be anyone from a friend to family member who agrees to share responsibility for repaying a loan if for some reason the primary individual is somehow unable to. Most often a parent will be a co-signer so that their child, who currently has no credit rating at all, can begin building good credit. In other instances, the co-signer's good credit may help someone with a poor credit score obtain a loan when they would immediately be denied otherwise.

Everyone starts out with a credit rating of 0. Unfortunately, having no credit score is almost as negative as having a bad one. There is no record of your credibility, which is inconvenient if you are a young adult trying to obtain a loan for a home, car, or tuition. Parents or guardians who understand the value of having credit may put the young person's name on a low utility bill and either let them make payments from a job or take care of it themselves. As long as the bill is paid in full and on time, it will reflect positively on that person's credibility. It will be much easier to move into the adult world of making large purchases, such as a first home, with good credit on your record.

For the unfortunate individual who has somehow managed to place him or herself into a bad credit score and is in need of a loan, a reliable co-signer could be just the thing to get you back on your feet again. No one plans to put him or herself into debt, and a helpful friend or family member will be more understanding than the institution from which you wish to borrow. A co-signer must have a good credit score and they must also be willing and able to take over the remaining money owed if for any reason the primary borrower cannot make the payments on their own.

If you are in debt and can't seem to catch a break at rebuilding your credit, a co-signer could be the answer to your prayers. Despite your reason for 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 who has good credit history and enough faith in your ability to repay the loan that you need, you may have a chance to get back on your feet for good. Co-signers are a great way to establish or re-build good credit.