Does Good Payment History Show Up on a Cosigner Credit Auto Loan?

Co-signers are often needed for certain borrows to qualify for a loan. The types of loan can be anything from an automobile loan to a mortgage. Co-signers take risks when agreeing to co-sign on any loan; however, when a co-signing agreement is handled well the co-signer can benefit from the process.

What is a Co-Signer?

A co-signor is someone who is willing to use his credit information to help another person qualify for a loan such as an automobile loan. People who have yet to establish credit and those with poor credit often need a co-signer. The co-signer not only allows the lender to use his credit to qualify for the loan but the lender will hold the co-signer responsible for the loan if the applicant defaults on the loan. The decision to co-sign for another person should only be taken after careful consideration and requires a great deal of trust in the applicant. You must feel secure in the fact that the applicant can not only afford to make the payments but will make the payments.

Positive Credit Reporting

When you co-sign for an auto loan, the applicant should take responsibility for paying the bill and at each payment the positive credit will be reported to not only his credit report but to yours as well. Co-signing for a responsible person can actually help your credit without requiring you to pay for the debt. The positive credit will be reported to the credit bureau the which the lender reports.

The Flip Side

While positive credit is reported to your credit report, the reverse also holds true. Anytime the applicant fails to make a payment, the negative information is also reported on your credit report. A borrower that mishandles the account can cause catastrophic damage to your credit report, especially if the loan is a large one such as a mortgage. An automobile loan may not be as high as a mortgage loan but can put a co-signer in a very difficult position if he has to make the monthly payment on the car. Not only can the applicant be sued for non-payment, but you can be sued as well. Creditors will pursue the co-signer as aggressively as the applicant.

Minimize Issues

Never take the applicant's word that payments are being made on time. Check the account monthly to make sure the payment has been made. A late payment cannot be reported to the credit bureau until it is 30-days late. By checking the payment monthly, you can see if the applicant has not made the payment, and you will have time to contact him and push him to make the payment before your credit is affected. Always be prepared to step in and make the auto payment if need be. Before agreeing to be a co-signor you should evaluate your financial situation and determine if you can afford to make the auto loan payments should the applicant default on the agreement.