Using a Co-signer to Boost Your Credit
A co-signer is someone who signs the promissory note for someone else's loan, usually because that person is having difficulty getting credit. Your co-signer can be anyone that you know and who has established good credit. Because they are agreeing to share the responsibility for the loan and to assume the payments if you cannot pay as agreed for someone, you generally want to ask someone who has a close connection to you rather than a casual acquaintance. The typical co-signer is a parent who will co-sign for a child who has no credit or bad credit, but other relatives and close friends may be willing to co-sign a loan. Getting a cosigner can be a good way to start building your credit history, or to compensate for a mistake that has resulted in a blot on your credit record that is resulting in being denied credt.
Everyone starts with a credit score of 0. Having no credit score is almost as bad as having a bad one. You have no track record, and thus no credibility in your claim to be willing and able to pay your bills on time, so businesses are understandably leery about letting you use their money. Some parents and guardians help their children build a credit history by putting a utility bill in the child's name as soon as the child turns 18 and then either paying it or letting the child pay from their own earnings. As long as the bill is paid in full and on time, it will create a positive entry on the person's credit history, making it a lot easier to move into the adult world and be able to buy a car, rent an apartment and do other important things.
Then there are people who have made some mistakes with credit in the past and now find it's difficult to prove that they have turned their lives around and are reliable enough to be entrusted with repaying a loan. As long as they aren't given a chance to build a positive credit history, they're stuck, unable to move forward. Getting a good co-signer may be enough to convince an institution to give them a chance. However, a co-signer must be willing to take over the loan if the primary borrower cannot make payments for any reason, so a person should think very carefully about co-signing for someone if there is evidence that the issues which led them into difficulty the first time are still present in their life. For instance, someone who just hit a rough patch in life through no fault of their own and fell behind on their payments but have recovered from those problems is probably a good risk, but someone with a history of difficulty getting along with supervisors or a tendency to want everything they see whether they can afford it is likely to get right back into the same problems.
If you need a loan to buy something important such as a car to get you to work but simply cannot seem to get a bank or other lender to loan you money on your own name, getting a co-signer may be the way out of the trap of not being able to build (or rebuild) a credit history without a good credit history. However, in the end it is the lending institution that will make the final decision about your creditworthiness, with or without a co-signer.
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