How Co-Signing Student Loan Affect Your Credit?
Before co-signing a student loan, make sure you know what you’re getting into because doing
so will have a great impact on your credit report if left to linger. The three major credit agencies
determine your credit worthiness and you wouldn’t want to risk that. If you agree to co-sign a
student, you are officially saying that you are responsible for that person whom you co-signed
for. And if that person neglects his or her loan, then you will be obliged to pay for it whether you
like it or not. There may be a good reason behind this but there are a lot of things to consider
too aside from that.
The significance of agreeing to co-sign for a student is that, you borrowing ability will be
affected because the lenders will see you as if you borrowed money just for yourself.
Most lenders also confirmed that 4 out of 5 co-signees had their co-signer pay for the
debts that the person owes. If the person you co-signed for missed out on their
payments, it would seem like you are the one who missed paying it.
The co-signer will always remain responsible for anything no matter what happens. If the
student gets into a financial difficulty and you co signed him for his education three of
four years after, the lenders may pursue you for the necessary payments. In some yet
extreme cases, the lender will force you to sell the assets just to pay for the debts.
Most parents are asked to co-sign for a student’s tuition because the student had a poor
credit score report. And often times, the young person who applies for his first credit card
will require all the papers and necessary documents to be co-signed.
If a student fails to pay for the agreement or bills that you agreed to co sign, usually, the
lender will first make an effort to have him pay what is borrowed before asking the co-
signer to pay for it, which is actually governed by the laws in which the contract was
Always remember that before you co sign a loan, you should have a lawyer draft a
contract that will officially set out the student’s and your obligation to the debt. You have
to ask him to enumerate the steps that one should take to pay back the debt. It is also
very important to include the steps that the student should take to repay the loan. This
document may not prevent the creditor from pursuing you for the payment but at least it
will formalize duties of the co signee.
It is not wrong to agree to co-sign for someone, especially if it means that you’re help him or her
out finanancially. But always be cautious and think about the consequences too in order to
avoid possible dilemma’s in the future.
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and 3 credit report regularly.