Does Having a Co-Signer on a Car Hurt Your Credit Score?

What a Co-Signer Will Do

Having a co-signer won’t affect your credit score one way or another. Instead, having someone co-sign on a car loan may help you obtain a better interest rate because the lender will factor in the co-signer’s credit history. If you are confident that you will be able to make regular payments on your car loan, having a co-signer to give you an extra “boost” in the beginning may be the key to bridging the gap between poor or nonexistent credit and good credit. In effect, having a co-signer may actually help increase your credit score in the long run.

Having a Co-Signer

While having a co-signer won’t negatively affect your credit score, it has other risks. If you’ve been told by a potential lender that you need a co-signer, consider your other options. Needing a co-signer may be a signal that the loan is too expensive for you altogether, and it may be smarter to wait until you can afford the loan. Even if you do find someone to co-sign, your interest rates may be still be high and your payments unmanageable.

What Affects Credit Score

If you want to improve your credit score, knowing what does affect it may be helpful. According to the leading credit scoring company, FICO, what weighs the heaviest on your score is your payment history. If you make timely payments on all of your accounts and pay your required balances, your score will improve. Also, keeping your debt low, having a long credit history, opening new lines of credit and having different types of accounts will all boost your credit score.

Risks for a Co-Signer

Your co-signer takes a much bigger risk than you do when co-signing on your car loan. If you miss a car payment, your lender will expect your co-signer to pay it. Even if you’ve demonstrated good money management, you may still deal with hardships like losing your job or getting sick — in which case your lender will also expect your co-signer to take on your debt. If your co-signer isn’t able to back you up, his credit score will take the hit, and your relationship with the co-signer may suffer as well.