When someone with a shaky or limited credit history applies for a loan, a borrower may offer a lower rate if the person can get a cosigner. The cosigner guarantees the loan will be repaid and becomes responsible for the loan if the borrower does not repay the loan.
More Debt
When you cosign for a loan, the credit scoring formula treats that debt as debt that you are responsible for repaying, even though you are just the cosigner. Having a large amount of extra debt will lower your credit score.
Payment History
The payments made by the person you cosign for will appear on your credit report. If the person makes late payments, your credit score will suffer.
Warning
Lenders often do not communicate with the cosigner about when late payments are made or if the borrower falls behind in payments until it is too late to protect the cosigner's credit report.
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