Don Wilson Finance: No to Co-Signing

I read this article that I wanted to share. It is from Kiplinger.com. It talks about why you don't want to co-sign for people on loans. This is important information to read and know. Many people will be asked or consider co-signing for someone during their lifetime. So it is important to know the facts about it...

Co-signing a loan can certainly affect your credit score and your ability to borrow money, even if the loan is always paid on time.

The loan you've co-signed for can show up on your credit report, just like any other debt you have. "Whatever the lender reports each month about the status of that account will be reported for each individual whose name is associated with the account," says Maxine Sweet of credit bureau Experian.

As a result, the loan you've co-signed for can increase the size of your outstanding debt -- added to your mortgage, credit-card balances, car loan or student loans -- when lenders are deciding whether to let you borrow more money. You might have a tough time taking out other loans if the lender decides that your debt-to-income ratio or balance-to-credit limit is too high -- even if the payment history is perfect.

Any late payments can show up on your credit report, too, sometimes without warning. Some lenders may notify co-signers and give them an opportunity to pay before reporting it as late but generally aren't required to give any notice. And if the borrower defaults on the loan, it can destroy your credit -- showing up as a default for you, too.

Go to the complete article at Kiplinger.com to learn more:

http://www.kiplinger.com/columns/ask/archive/2007/q0222.htm

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