Credit Score to Be a Co-Signer

Your credit score is an important number that affects your ability to get loans and other types of credit. If you have a family member or friend with a bad credit score, you might be asked to be a co-signer. You'll need to have a good score yourself in order to be able to do this. In addition to knowing the credit score range that it takes to be a co-signer, you should also consider how doing this can affect your score.

Definition

A co-signer is a person who agrees to guarantee another person's loan using her own good credit score to get the loan approved. Often, bad credit or a short credit history will prevent someone from being approved for a car loan or other account on his own. However, the lender may agree to give the loan if a co-signer with a good credit score agrees to take on liability. If the original person defaults, the co-signer can be held responsible for repayment.

Required Credit Score

According to the Bad Credit Repair resource site, a co-signer needs to have a good credit score because the lender will want to ensure that he can repay the loan in case of a default. People with FICO credit scores of 700 or more should have no problem qualifying to co-sign a loan. A score between 699 and 680 may be good enough for co-signing. If the score is between 679 and 620, it is questionable, and anything below 620 will most likely not be good enough.

Benefits

If a co-signer has a high credit score, the terms of the loan may be much more favorable. A person with poor credit often has to pay an extremely high interest rate if she qualifies for credit on her own. If she can find a co-signer with an excellent credit history, the lender will take that into account and offer more competitive terms.

Effects

Many co-signers do not realize that co-signing a loan for someone else affects their own credit scores. Part of your FICO score is based on how much you owe and the number of new accounts you have opened. Because you are fully liable for a co-signed account in case of a default, it figures into your credit score and can bring it down.

Warning

The Federal Trade Commission warns that when the original borrower defaults on a co-signed loan, up to 75 percent of co-signers end up having to pay it off. Mary Rowland of MSN Money says the creditor can choose to come after you first, without trying to collect from the original party. Besides being liable for the full loan amount, you could also get hit with late charges and court and attorney fees. You could also have your wages garnished or your property could be attached. This will hurt your credit score significantly.