Credit is generally extended to consumers based on information contained in their credit reports. Information on a credit report will not only reflect loans that a consumer is directly responsible for paying, but also loans for which they have signed as a cosigner. A cosigner is not responsible for paying the loan as long as the loan is not in default, but the obligation that they may have to pay will be there until the loan is paid in full.
Significance
A cosigned debt will appear on the cosigner's credit report much like any other debt. Delinquencies and other negative information, as well as positive payment information on the account, will appear on the cosigner's credit report.
Primary Borrower Impact
The credit report of the primary borrower may also reflect the presence of a cosigner on the cosigned account.
Effects
The presence of negative information will impact both the primary's and cosigner's credit reports negatively, making it more difficult to obtain new credit for the cosigner.
Considerations
The appearance of the cosigned account will also impact the cosigner's ability to obtain new debt even if the account is kept is good standing as the balance will be figured into the cosigner's debt ratio since they may at some point become responsible for paying the debt.
Misconception
Cosigning for a loan does not have to automatically preclude the consumer from obtaining new credit, though proving that the loan is being paid by the primary consumer may be required before new credit can be extended.
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