Impact on Credit Worthiness (Getting A Loan with a Co-signer vs without)
It doesn't matter to the credit agencies if there is a co-signer or not. However, your family member will need to take into consideration if they are willing to be responsible for the loan in the event you are unable to make payments. Being a co-signer means they are agreeing to pay the loan amount. It will also impact their credit score/report, either improve it if all goes well, or destroy it if neither one of you are able to pay the loan. So to you, assuming you can pay all the payments and not default, it makes no difference. But to the co-signer, it could create a huge impact.  https://www.thebalance.com/does-co-signing-affect-credit-315368
"The risk is that you will owe the bank the principal amount of the mortgage. Based on your question it would be foolish for you to sign. Anyone who describes a mortgage as ""something"" obviously has no idea what they are doing and should never sign a mortgage which is a promise to pay hundreds of thousands of dollars. You would be doubly foolish to sign the mortgage because if you are guaranteeing the loan, you own nothing. So, for example, if your friend sold the house, pocketed the money, then left the country you would owe the full amount of the mortgage. Since you are not on the deed there is no way you can prevent this from happening. He does not need your approval to sell the house. So, essentially what your ""friend"" is doing is asking you to assume all the risk of the mortgage with none of the benefits, since he gets the house, not you. If a ""girlfriend"" is involved, that just increases the risk you will have a problem. Also, although it is not clear, it appears this is a second house for him. If so, that disqualifies him from any mortgage assistance or relief, so the risk is even higher. Basically, it would foolish in the extreme to co-sign the loan." Never co-sign a loan for someone, especially family  Taking out a loan for yourself is bad enough, but co-signing a loan is just plain stupid. Think about it, if the bank is asking for a co-signer its because they are not very confident that the applicant is going to be paying back the loan. So why would you then step up and say I'll pay back the loan if they don't, make me a co-signer please. Here is a list of things that people never think about when they cosign a loan for somebody.  Now if you absolutely must co-sign a loan here is how I would do it. I, the co-signer would be the one who makes the payments to ensure that the loan was paid on time and I would be the one collecting the payment from the person who is getting the loan. Its a very simple way of preventing some of the worst situations that can arise and you should be willing to make the payments anyway after all thats what it means to cosign a loan. Your just turning things around and paying the loan upfront instead of paying after the applicant defaults and ruins every ones credit. (Source: user's own blog post Never co-sign a loan for someone, especially family) Considering I'm putting 30% down and having my father cosign is there   any chance I would be turned down for a loan on a $100k car? According to BankRate, the average credit score needed to buy a new car is 714, but they also show average interest rates at 6.39% for new-car loans to people with credit scores in the 601-660 range. High income certainly helps offset credit score to some extent.  Not every bank/dealership does things the same way. Being self-employed you'd most likely be required to show 2 years of tax returns, and they'd use those as a basis for your income rather than whatever you have made recently. If using a co-signer, their income matters. Another key factor is debt to income ratio, if too much of someone's income is already spoken for by other debts a lender will shy away. So, yes, there's a chance, given all the information we don't know and the variability with lender policies, that you could be turned down for a car loan. How should I go about this? If you're set on pursuing the car loan, just go talk to some lenders. You'll want to shop around for a good rate anyway, so no need to speculate just go find out. Include the dealership as a potential financing option, they can have great rates. Personally, I'd get a much cheaper car. Your insurance premium on a 100k car will be quite high due to your age. You might be rightly confident in your earning potential, but nothing is guaranteed, situations can change wildly in short order. A new car is not a good investment or a value-retaining asset, so why bother going into debt for one if you don't have to? If you buy something in cash now, you could upgrade in a few years without financing if your earning prediction holds and would save quite a bit in car insurance and interest over the years between. Note that this kind of entry on your credit record may also affect your ability to get a job. Basically, you're going on record as not honoring your commitments... and unless you have a darned good reason for having gotten into that situation and being completely unable to get back out, it's going to reflect on your general trustworthiness. In this example you are providing 4x more collateral than you are borrowing.  Credit score shouldn't matter, regardless of how risky a borrower you are.  Sure it costs time and money to go to auction, but this can be factored into your interest rate / fees. I don't see how the bank can lose. "US based so I don't know how closely this translates to the UK, but generally speaking there are three things that contribute to a strong credit score. Length/volume of credit history. This is a combination of how many accounts appear in your history along with how long they have been open.  Having a series of accounts that were maintained in good standing looks better than only having one.  Maintaining an account in good standing for a prolonged period (3+ years) is better than a bunch of short term items.  ""Ideally"" your credit history should contain a mix of term loans that were paid per contract and a few (1?) revolving account that shows ongoing use.  The goal is to show that you can handle ongoing obligations responsibly, and manage multiple things at the same time. Utilization. Or how much you currently owe vs how much people have agreed to lend you.  Being close to your limits raises questions about whether or not you can really handle the additional debt.  Having large availability raises questions about whether you would be able to handle it if you suddenly maxed things out.  Finding the correct middle point can be challenging, the numbers I have seen thrown around most by the ""experts"" is 20-30% utilization. Recent Activity. Or how much new debt have you taken on?  If someone is opening lots of new accounts it raises red flags.  Shopping around for a deal on a auto loan or mortgage before settling on one is fine.  Opening 5 new credit lines in the past 6 months, probably going to knock you down a bit.  One of the concerns here is have you had the accounts long enough to demonstrate that you will be able to handle them in the long term. One route that was suggested to me in my early years was to go take out a 6mo loan from a bank, and just place the money in a CD while I made the payments.  Then repeat with a longer term.  Worst case, you can cash out the CD to pay off the loan in an emergency, but otherwise it helps show the type of history they are looking for. All that said, I have to agree with Pete B's answer.  Don't play the credit game if you don't really need to.  Or play it just enough to stay in the game and plan your finances to avoid relying on it.  (Advice I wish I had taken long ago.)" Also - the more credit facilities you have, the risikier you get. Say Company A lends you $8.000 for a down-payment - let's say you then go out and max out your other 100k facilities - you now have debt of 108k. What guarantee does the Company A have of repayment? Fewer credit facilities = better chance of getting a new loan. This very much depends how you use that second line of credit and what your current credit is. There are of course many more combinations buy you can probably infer the impact based on these cases.   Your credit score is based on your likely hood of being profitable to a creditor should they issue you credit. This is based on your history of your ability to manage your credit.  Having more credit and managing it well shows that you have a history of being responsible with greater sums of money available.  If you use the card responsibly now then you are more likely to continue that trend than someone with a history of irresponsibility.  Having a line but not using it is not a good thing.  It costs the creditor money for you to have an account.  If you never use that account then you are not showing that you can use the account responsibly so if you are just going to throw the card in a safe and never access it then you are better off not getting the card in the first place. That is an opinion.  I don't think so.  Here are some differences: If you use credit responsibly and take the time to make sure the reporting agencies are being accurate, a good report can benefit you.  So that isn't like a criminal record. What is also important to know is that in the United States, a credit report is about you, not for you.  You are the product being sold.  This is, in my opinion, and unfortunate situation but it is what it is.  You will more than likely benefit for keeping a good report, even if you never use credit. There are many credit scores that can be calculated from your report; the score is just a number used to compare and evaluate you on a common set of criteria. If you think about it, that doesn't make sense.  The score is a reflection of how you use credit.  Having and using credit is a commitment.  Your are committing to the lender that you will repay them as agreed. Your choice is who you decide to make agreements with.  I personally find the business practices of my local credit union to be more palatable than the business practices of the national bank I was with.  I chose to use credit provided by the credit union rather than by the bank.  I am careful about where I take auto loans from, and to what extent I can control it, where I take home loans from. Since it is absolutely a commitment, you are personally responsible for making sure that you like who you are making commitments with. "You promised to pay the loan if he didn't.  That was a commitment, and I recommend ""owning"" your choice and following it through to its conclusion, even if you never do that again.  TLDR: You made a mistake: own it, keep your word, and embrace the lesson.  Why?  Because you keep your promises.  (Nevermind that this is a rare time where your answer will be directly recorded, in your credit report.) This isn't moralism. I see this as a ""defining moment"" in a long game: 10 years down the road I'd like you to be wise, confident and unafraid in financial matters, with a healthy (if distant) relationship with our somewhat corrupt financial system.  I know austerity stinks, but having a strong financial life will bring you a lot more money in the long run. Many are leaping to the conclusions that this is an ""EX-friend"" who did this deliberately.  Don't assume this. For instance, it's quite possible your friend sold the (car?) at a dealer, who failed to pay off this note, or did and the lender botched the paperwork.  And when the collector called, he told them that, thinking the collector would fix it, which they don't do. The point is, you don't know: your friend may be an innocent party here.  Creditors generally don't report late payments to the credit bureaus until they're 30 days late.  But as a co-signer, you're in a bad spot: you're liable for the payments, but they don't send you a bill.  So when you hear about it, it's already nearly 30 days late.  You don't get any extra grace period as a co-signer. So you need to make a payment right away to keep that from going 30 late, or if it's already 30 late, to keep it from going any later.   If it is later determined that it was not necessary for you to make those payments, the lender should give them back to you.  A less reputable lender may resist, and you may have to threaten small claims court, which is a great expense to them. Cheaper to pay you.  They say France is the nation of love. They say America is the nation of commerce.  So it's not surprising that here, people are quick to burn a lasting friendship over a temporary financial issue.  Just saying, that isn't necessarily the right answer.  I don't know about you, but my friends all have warts.  Nobody's perfect.  Financial issues are just another kind of wart.  And financial life in America is hard, because we let commerce run amok.  And because our obsession with it makes it a ""loaded"" issue and thus hard to talk about.  Perhaps your friend is in trouble but the actual villain is a predatory lender.  Point is, the friendship may be more important than this temporary adversity.  The right answer may be to come together and figure out how to make it work.  Yes, it's also possible he's a human leech who hops from person to person, charming them into cosigning for him. But to assume that right out of the gate is a bit silly.  The first question I'd ask is ""where's the car?"" (If it's a car). Many lenders, especially those who loan to poor credit risks, put trackers in the car.  They can tell you where it is, or at least, where it was last seen when the tracker stopped working.  If that is a car dealer's lot, for instance, that would be very informative.   Simply reaching out to the lender may get things moving, if there's just a paperwork issue behind this.  Many people deal with life troubles by fleeing: they dread picking up the phone, they fearfully throw summons in the trash.  This is a terrifying and miserable way to deal with such a situation.  They learn nothing, and it's pure suffering.   I prefer and recommend the opposite: turn into it, deal with it head-on, get ahead of it.   Ask questions, google things, read, become an expert on the thing. Be the one calling the lender, not the other way round.  This way it becomes a technical learning experience that's interesting and fun for you, and the lender is dreading your calls instead of the other way 'round.  I've been sued.  It sucked.  But I took it on boldly, and and actually led the fight and strategy (albeit with counsel).  And turned it around so he wound up paying my legal bills.  HA!  With that precious experience, I know exactly what to do... I don't fear being sued, or if absolutely necessary, suing.   You might as well get the best financial education.  You're paying the tuition!" "If you are the type of person that gets drawn in to ""suspect"" offers, then it is conceivable that if you are not signing the services offered your credit would be improved as your long term credit strengthens and the number of new lines of credit are reduced. But if you just throw it all away anyway then it is unlikely to help improve your score.  But there is no direct impact on your credit score." I believe that your son will need to get a new loan for the car in his name only and use the proceeds of that loan to pay off the one you co-signed on.  The only way that will happen is if he can find a lender willing to loan him the money based on his credit only. From the current lender's perspective, if your son isn't a good credit risk, then why would they let someone out of the loan who might be able to pay if your son defaults?  If he is a good credit risk, then they, or someone else, should be willing to lend to him without you as co-signer. Also, as Dilip Sarwate mentioned, you might have to do something with the title, depending on whose name it is in. Is it difficult to ask the credit card issuer for two cards, even if the account belongs to one person? You can most definitely get two cards for one account. People do it all the time. You just have to add her on as an authorized user.  Would it be better for me to apply for the card on my own, or would there be an advantage to having her co-sign? It depends. If she co-signed, then that means she is also responsible for the credit card payments - which can help her credit score. If its is just you applying, then you are the only one responsible. If you don't want her lower credit score to impact what you could be approved for, then only you should apply. However, if you are the sole account holder, then you are responsible for the payments, which means, if in the event you guys break up and she maxes out the card before you cancel it, then you are on the hook for what she spend.  As for improving her credit score, I do know that some banks report to the credit bureaus for the authorized user as well, so that could help her out too. The point of co-signing for a friend is that they're your friend.  You signed for them in the belief that your friendship would ensure they didn't burn you.  If your friend has hung you out to dry, basically they aren't your friend any more. Before you lawyer up, how's about talking to your friend as a friend?  Sure he may have moved away from the area, but Facebook is still a thing, right?  It's possible he doesn't even realise you're taking the fall for him. And presumably you have mutual friends too.  If he's blanking you then he does know you're taking the fall and doesn't care.  So call/message them too and let them know the situation.  Chances are he doesn't want all his other friends cutting him off because they can see he'd treat them the same way he's treating you.  And chances are they'll give you his number and new address, because they don't want to be in the middle. If this fails, look at the loan.  If it's a loan secured against something of his (e.g. a car), let it go.  The bank will repossess it, and that's job done.  Of course it will look bad on your credit for a while, but you're basically stuck with that. The article states their reasons pretty clearly, and indicates that some people won't qualify under the new requirements that would have previously, they're not courting people with bad credit, they're just looking beyond credit score at other factors. They aren't opening floodgates for anyone with a pulse to get a car loan, just shifting things a bit to cast a slightly wider net. This is not new in the world of secured debt, the FHA has methodology for establishing a non-traditional credit report based on things like rental history, utility payments, auto-insurance payments, a person can't be declined an FHA loan for lack for lack of traditional credit history. I look beyond credit score as a landlord, a tenant with poor credit but a stellar rental history is more appealing than someone with great credit but a bad rental history. Vehicles and housing are very important to people, so they are likely to prioritize them above credit card payments or hospital bills. Time will tell, but it seems like a solid move in my view, they can refine their model over time and likely find a solid customer base among those who wouldn't qualify on credit score alone.