If I cosign for someone's motorcyle how will it effect my credit score?

Question

I have complete trust for this individual in paying back the loan but I am going to buy a house in the next year so I'm wondering if this cosigning will help improve my credit rating in getting a home loan or will it hinder my efforts?

Answer 1

Speaking as a nationally known credit score and lending expert (book, radio shows, nespapers columns, etc.):

First piece of advice--DON'T DO IT!!!!!!!!!!!

If you are foolish and do not take my advice, then make certain they pay YOU the payment on time, and YOU pay the creditor. That way, you will know that the payment is on time.

If the person you sign for doesn't pay you, too bad! You owe the debt.

If you do not pay on time (or trust them to pay it and they pay 30+ days late), it will affect your home loan rate or you may actually get declined for the loan, depending how how badly they harmed your scores.

Further, the monthly payment will be added to your "debt ratio" for mortgage lending purposes and you WILL qualify for a LOWER purchase price assuming you fully document your income.

Still seem like a good idea?

Answer 2

If you're a co-signer for a vehicle, you're stuck in a tough place. The collectors/creditors come after everyone on the loan, including their assets and income. I've heard of people who cosign for someone who quits making payments. The cosigner can either pick up the slack (usually while the primary borrower still enjoys the vehicle!) or they can also not make the payments, which seriously harms your credit. I know someone who is cosigner for someone, but they're not on the title/registration. They do not have the legal right to take back the vehicle. This really sucks for the cosigner. If you are able to get the vehicle back, selling it or turning it back into the creditor (voluntary repossesion) is less harmful for your credit.

Whatever you decide, make sure you ABSOLUTELY know what you're getting into, and who you're helping out. Girlfriends/boyfriends are especially bad. If you break up, it gets sticky. And even worse when you have a new girlfriend/boyfriend!

One last thing, motorcycles are considered a loan risk for creditors anyway. Most loan officers agree that if someone is in financial trouble, one of the first payments they'll stop making is on a recreational vehicle. Also, most creditors STRONGLY suggest credit life insurance. You cannot ignore the fact that a lot of people can die from a simple accident on a motorcycle. Credit life pays for the vehicle's loan in the event of the borrower's death. It usually costs .05 - .20 cents per $100 of the loan.

Best of luck!

Answer 3

If they miss a payment, it will definitely affect your credit score. You will have creditors calling you for payments as well. My grandma cosigned on a loan for someone she thought she had complete trust in because they told her that the creditors could never ask her for money, and now they are calling everyday asking for the next payment (and it's only a few days late). Make sure that you feel that it is the best possible thing to do, because you might end up with a higher interest rate on your loan if your friend isnt paying off his loan.

Answer 4

If they miss a payment or are even late on a payment, it will go on your credit score. If they default on the loan, you will be on the hook for the entire amount.

The other thing to consider, especially if you are going to be trying to get a loan for a house next year, even if your friend is making every payment on time, when you apply for the loan, the mortgage company is going to look at that as an outstanding debt for you. If the payment on the motorcycle loan is for example, $200 a month, it will reduce the amount the mortgage company believes you can afford per month by $200, even if you aren't the one making the payment. You are still ultimately liable for it.

Answer 5

It won't effect your credit at all until the person you have complete trust in proves the bank knows something you don't want to. If they are willing to accept a co-signer, it means they think the person WILL default. They are almost always right. Even if the person doesn't default, this is one more debt to damage your debt to income ratio.

The REAL definition of co-signing is YOU get a loan and the OTHER person gets the money.

Answer 6

It will effect your debt ratio, but some mortgage lenders will not count it if you can prove the other person is making all of the payments. They will normally require cancelled checks showing this.

Be sure you can trust this person, because if for some reason he doesn't make payments, it will screw up your credit and you will be responsible for the debt.

Answer 7

This loan will show if you're co-signing, so it could affect your credit ability when you try to buy a house. Basically, if your friend can't afford to buy his or her motorcycle with their own credit, its not a good idea to indebt yourself if you're still building your life. This is one of the biggest causes of lawsuits in our country!

Answer 8

utilising debit enjoying cards does not I REPEAT does not impact credit in any way even used as a mastercard.yet-whether it could in case you default on your account and leave a unfavorable stability.Then it exhibits as unpaid invoice.Debit pastime won't in any respect ever be on your credit record.whether it incredibly is somebody has made a mistake and you're able to get it fastened

Answer 9

I sure hope this person is completely trustworthy! If they don't pay or miss one payments or pay late, this will all reflect your credit score. And if they don't pay it off, you will have to in order to protect yourself. So make sure this is something you really want to do.

Answer 10

DO NOT DO IT BECAUSE KNOW MATTER HOW WELL YOU KNOW THE PERSON RATHER IT BE A GOOD FRIEND OR BLOOD MEANING FAMILY IF THEY DEFAULT ON THE LOAN OR SHOULD LOSE THERE JOB THEY WILL COME AFTER YOU FOR THE MONEY .DO NOT DO IT. NOT MY SELF BUT I SAW A GOOD FRIENDSHIP RUINED OVER THIS VERY SAME THING. DONOT DO IT