Several reasons exist as to why the rental property owner might ask you for a co-signer. It might be because you have poor credit, but it can also be due to having no credit or too little credit. If you have not lived on your own before, or are very new to the area without an income yet, he might want a co-signer to ensure your rent will be covered. Regardless of the reason, you have been asked to find one. Who do you ask? The most important qualification for a cosigner is his credit rating.
Tip
When asked to find a co-signer for a lease, find a relative or friend whose credit score is better than yours, preferably in the 700-range in order to convince the landlord to lease to you.
Defining a Co-signer
In choosing who to ask, you need to know what you are asking the co-signer to do. A co-signer is the person who will be responsible for your rent payment should you fail to make it on time. It means that this person is agreeing to receive notification from the landlord if you miss your rent payment, and that the co-signer will pay it for you. Whether you pay it back to the co-signer later will be between you and the co-signer; however, in most cases, cosigners are not too happy to get that call and write that check.
If your co-signer does not pay your rent when notified that you have defaulted, this can not only appear on your credit report, but it can also be placed as a negative on your co-signer's credit. The co-signer essentially puts his credit up as collateral, guaranteeing the landlord that the rent will be paid every month while you live there.
Due to the fact that co-signing puts the person on the hook for your rent and can potentially damage his credit, it is not something most people agree to do for casual friends or relatives who have demonstrated irresponsibility in the past.
Reviewing Co-signer Credit Requirements
Due to the reasons you were asked to find a co-signer in the first place, your co-signer has to have decent credit and, in most cases, is expected to have above-average credit. The landlord will conduct a credit check on the co-signer, just like he did on you. If your potential co-signer does not have acceptable credit, the landlord makes the decision on how to proceed with your application. Choose your co-signer carefully.
A way to find out if the person you are asking will pass muster is to tell that person you need a co-signer due to having credit issues or not enough credit and ask if they would be willing to co-sign for you. Typically, if the person you ask also has credit issues, he will say so, or at least say he does not want to co-sign (rather than tell you his credit is tanked.)
Look for a High Credit Score
A safe bet for finding a co-signer to pass your landlord's inspection is for the co-signer to have a credit score of 700 or better. It can be awkward to ask the co-signer what his credit score is, especially when you are asking him to do a huge favor for you by signing in the first place.
Some landlords will accept a co-signer with a score of less than 700. You should ask what credit score he would like the co-signer to have so you make sure to bring him what he wants.
Whether someone co-signs or not is an individual choice. Don't take offense if people decline. It could be due to them having their own credit issues, or they could have been burned in the past. Their debt ratio may already be too high, or they won't be able to cover your rent if you default and they don't want to take that risk.
If you are unsuccessful in finding a co-signer, you can also try a professional co-signing company. They charge fees for the service and usually only co-sign for those whose income is not high enough to pass the landlord's requirements. In most cases, they will not assist someone who actually has poor credit.
Regardless of whether you need a cosigner for auto financing, having a car loan is a great way to improve your credit.
How Does a Cosigner Help?
Having a cosigner can be helpful if you have poor credit, or haven’t used credit in the past. A lender will look at their credit as a guarantee that the loan will be repaid, while a cosigner agrees to make payments if the primary borrower can’t.
Who Can Be a Cosigner?
Anyone who qualifies can be your cosigner, but it isn’t something to be taken lightly. People typically ask either close friends or family members to be a cosigner because of the risks and requirements involved. Whoever you choose will have to qualify for the loan, just as you would. This means that besides having good credit, they must meet the lender’s income and debt to income requirements.
What are the Risks of Having a Cosigner?
The saying “with great power comes great responsibility” really applies to the borrower/cosigner relationship. A cosigner has the power to help you get a loan, but that means they’re responsible for paying for it in the event that you can’t – or don’t.
Because any activity on the loan – good or bad – will show up on both credit reports, what you do will directly affect your cosigner’s credit score. Your responsibility is to ensure you’re ready to take on the loan, and to make all payments on time. Doing so will build your credit, and help to ensure that your credit has improved enough for you to go it alone on your next loan.
If you find yourself unable to keep up with the responsibilities of your auto loan, don’t wait for the lender to knock on your cosigner’s door. At the first sign of a possible missed payment, contact your lender and see if they can help. This may help avoid potential consequences, like repossession, which can hurt both you and your cosigner.
How Do I Know if I Need a Cosigner?
Only a lender can require you to get a cosigner. The best way to increase your chances of getting the loan you need without a cosigner is to start at the right dealership – but not all dealers work with people who have poor credit.
Luckily, Auto Credit Express works with a nationwide network of special finance dealers that have the lending resources available to help many credit-challenged consumers. Let us help put you on the path toward auto financing with our no-obligation auto loan request form. It’s free and simple to get started, so take the first step today!