Will You Co-Sign for Me?
It is a question that few want to hear. Most people do not want to ignore a family member or friend in need, but co-signing comes with risks that make many justifiably nervous to sign on the dotted line. So, should you do it? There are many factors to consider before making a decision.
What are the risks?
One risk that you incur when co-signing is the primary applicant making the payments late or not at all. Late or non-payments may be recorded on your credit report, which can lower your credit score. You could also start to experience collection activity, such as phone calls from the creditor. If you do not have the money to make the payments yourself if the primary applicant stops paying, co-signing may not be a good idea.
Why is the person’s credit score low?
A low credit score can be seen as a sign that there is a good chance the person will not repay the debt, but it is also helpful to consider why the person has a low score. A person who had problems in the past, but corrected them, is probably less of a risk than someone who continues to experience difficulties or exhibit poor financial habits.
What are you being asked to co-sign for?
Ask yourself if the person can do without what he or she is asking you to co-sign for. It may not make sense to put yourself at risk if what you are co-signing for is not a necessity.