What is the effect on my credit score if a loan is reported as joint instead of co-signed?

Question

I need to improve my credit score within a six month period in order to refinance my home at a better rate than the one I currently have. My loan to income ratio is high because I am single and on a fixed income but live with my boyfriend who has income, but no credit. Specifically, we signed for an auto loan together hoping for a better rate even though it was purchased with the intension he would be making the payments from his pay. I prefer to remain on the title, as it is, because I provided the down payment. The problem I have now is that on my credit report this auto loan adds an additional and hefty liability to my already stretched debt to income ratio. Any way to improve this outlook for my credit score? One reporting agency shows the loan as a "joint" account, the other as a "co-signed" loan. Do they effect my score differently? It has created stress between us because if he pays late, it's reported on my account. Any ideas besides selling or splitting up?

Answer 1

Weather a loan is reported as joint or co-signed makes no difference as far as your credit is concerned.

The only way to get this out of your name is for your boyfriend to refinance the vehicle is his name only. After he has made 18-payments as long as they were made as agreed, he should be able to do this.

Answer 2

Pookie,

Let's keep this realer than real.

I consistenly find women trying to create a budget to work for a man that has a job, but for some odd reason doesn't have ANY CREDIT or worse, jilly-jacked up credit.

Why are you going to all of these crazy financial arrangements to shelter HIM from the rain?

If he can produce bacon, then why can't he make the car payments on time? Please note that you said the car was purchased "with the intension that he would be making the payments from his pay".

What the heck do you mean intention?

Either the man PAYS the car note or he doesn't. You can never pay a car note based on GOOD INTENTIONS -- you pay it with legal tender -- that is CASH -- NOT tired a$$ excuses.

Here's the real scoop!

You got your man to get onto this car note because you KNEW that your fixed income ALONE would not allow you to qualify for and purchase the vehicle that you wanted -- especially when you already have a mortgage.

So you figured if you could get your less financially responsible, income-producing boyfriend to sign the auto loan with you -- you would qualify for the loan, get the car, and you could help improve his credit situation at the same time.

As a show of good faith, you put the down payment on the vehicle because quite frankly, your Boo ain't got that kind of credit or cash! But I am sure he has a lot of good intentions, though!

Problem == There is a reason your boyfriend has NO CREDIT/BAD CREDIT. He doesn't pay bills on time!

Now you want to change the nature of the loan agreement. But guess what, your BOO doesn't have enough credit to convince a creditor to remove YOU from the loan agreement. The creditor KNOWS you got fixed income, so they want you to remain on, in case your boyfriend continues to be trifling (delinquent) with his payments.

So, in this scenario, your best bet is to do what you have been avoiding altogether -- SELL THE CAR since your boyfriend is STRUGGLING to begin with -- this will restore your debt to income back to where it should be.

Second, there will be no late payments on the auto loan since you aren't relying on your less-than-financially responsible boyfriend. This will help your FICO score as well!

Third, you don't have to argue with your man about stuff he is ill-equipped to handle!

I just hope the vehicle's fair market value is MORE THAN the loan amount. It would be a "hot mess" if you were already "upside down" in the auto loan.

Finally, stop trying to fix your man's bad credit -- he needs to get HIS OWN CREDIT on his own terms ON HIS OWN TIME! Leave credit rehabilitation for the PROFESSIONALS.

Answer 3

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

I review a LOT of credit reports. The credit reports with adequate detail will list either type of account as "Joint" the way you describe it. That will be the same either way.

An "Authorized" account will not raise credit as much, thanks to a July 2006 change in how credit scores are calculated.

BUT when you have a Joint account, for home loan purposes, you RAISE your debt ratio by taking on a Joint account.

Creditors are extremely unlikey to allow a co-signor off. They get to collect from two people instead of one in case of defaluted loan.

Maybe you can just refinance the car? If you are not upside-down.

Answer 4

It won't make much difference. It's a liability to you either way. Your loan to income ratio doesn't affect your credit score although it certainly will affect your interest rate and even qualification for a loan.