Avoid Co-Signing Loans
Think hard and carefully before you agree to co-sign a loan with someone. This venture is risky no matter how you look at it.
First of all even though the loan is co-signed, you are the person who is going to be held responsible for making payments on time. Any late payments will also be reported on your credit reports and will lower your credit scores even if the late payment was not your fault.
In addition if the loan appears on your credit report it can affect your debt to income ration and lower your FICO score. This could limit your ability to qualify for credit that you need.
The best option is to loan the person in need your cash, not your credit. It is best not to co-sign for anyone but if that is the only option make sure that your partner-in-credit fully understands the consequences if they are late with a payment or can’t pay at all.
Also be sure to sign an agreement on paper that the person will pay any extra interest back to you that might be incurred as the result of a failed payment. An agreement like this should also be signed if it is your spouse or partner that you are cosigning with. Make sure you are specific when explaining who is responsible for what loan. This way you are protected in the event of a divorce or a separation.