How Does Cosigning a Loan Affect Your Credit?

May 27, 2025 • Credit Repair

Cosigning a loan might feel like helping someone out—but it could come back to haunt your credit score.

When you agree to cosign, you’re not just putting in a good word. You’re taking on full legal responsibility for the loan if the primary borrower can’t—or won’t—pay. Many people don’t realize how much risk this carries until it’s too late.

This article breaks down exactly how cosigning affects your credit report and credit score, what happens if things go sideways, and how to protect yourself if you do decide to move forward.

What It Means to Cosign a Loan

Cosigning means you’re agreeing to back someone else’s loan with your own credit history. If they don’t pay, the lender will expect you to.

Unlike a reference or a character witness, a cosigner is legally responsible for the loan. If the borrower stops making payments, the lender won’t just ask nicely—they’ll come after you for the money.

What Is a Cosigner?

A cosigner is someone who signs a loan alongside the primary borrower and promises to repay it if the borrower fails to do so. You don’t get access to the funds or benefit from the loan directly—but your name and credit are on the line.

The key difference between a borrower and a cosigner is who uses the money. The borrower receives the loan and agrees to repay it. The cosigner guarantees the repayment and is equally responsible, even though they don’t use the loan.

Why Lenders Require a Cosigner

Lenders ask for a cosigner when the primary applicant doesn’t meet the approval criteria. This usually means they have little credit history, a low credit score, or unstable income.

Adding a cosigner gives the lender more confidence. If the borrower flakes, they have another person they can legally pursue for payment.

How Cosigning a Loan Affects Your Credit

Cosigning a loan ties your credit to someone else’s financial habits. It can help your credit if everything goes smoothly—but it can damage it quickly if payments are missed.

The Loan Shows Up on Your Credit Report

Once you cosign, the loan gets added to your credit report. It doesn’t matter that someone else is the one making payments—it shows up under your name too.

This means it counts toward your total debt. That can affect your credit profile, even if no payments are missed.

It Impacts Your Credit Score—Positively or Negatively

Cosigning can help or hurt your credit score, depending on what happens next.

Positive effects: If the borrower makes every payment on time, your credit score may benefit. It shows you're connected to a well-managed account.
Negative effects: If the borrower misses payments or defaults, it damages your credit score just like it would if the loan were yours.

Your Credit Utilization and DTI Can Go Up

Cosigning increases the total debt listed on your credit report. That can raise your debt-to-income ratio and affect your credit utilization, both of which can lower your credit score or make it harder to qualify for other credit.

If you’re planning to apply for a mortgage, car loan, or even a credit card, lenders will factor in the cosigned loan when evaluating your application.

What Happens If the Primary Borrower Misses Payments?

Cosigning means you’re on the hook if things go wrong—and late payments can snowball fast.

You’re Legally Responsible

If the borrower misses a payment, it won’t just hurt them—it will hurt you too. Missed payments are reported on your credit report, and the lender can hold you accountable for repayment.

In the eyes of the lender, you’re not a backup—you’re an equal partner in the loan.

Delinquencies and Defaults Show Up on Your Report

Missed payments usually show up after 30 days. If they continue, the negative marks escalate:

30 days late: Affects your credit score and triggers late fees.
60–90 days late: Multiple missed payments worsen the damage.
120+ days late: The account could be sent to collections or charged off.

At that point, you may be dealing with collection calls, legal action, or wage garnishment. And all of this lands on your credit report for up to seven years.

How Long Does a Cosigned Loan Stay on Your Credit?

A cosigned loan stays on your credit report for the full length of the loan term. Whether it’s an auto loan, personal loan, or student loan, it will remain on your report until the debt is fully paid off or refinanced without you.

Even if the primary borrower is responsible with payments, you’re tied to that account until it’s closed or your name is officially removed.

How to Protect Your Credit if You Cosign

Cosigning doesn’t have to end in disaster—but you do need to be proactive.

Set Clear Expectations With the Borrower

Talk honestly before signing anything. Make sure the borrower understands the stakes and agrees to a clear plan for repayment. If possible, get it in writing.

Get Access to Loan Info and Statements

Ask the lender to give you access to account details so you can see payment activity. Some lenders allow cosigners to receive alerts or online access.

This lets you catch issues early—before they damage your credit report.

Consider a Release Clause or Refinance Option

Some lenders offer a cosigner release after a set number of on-time payments. Others allow refinancing the loan solely in the borrower’s name.

Ask upfront about these options before you cosign. It gives you a clear path to eventually remove yourself from the loan.

Monitor Your Credit Regularly

Don’t wait until there’s a problem. Set up alerts and keep an eye on your credit report.

Use a free credit monitoring service to track changes and spot missed payments immediately.

When Does Cosigning Make Sense? (And When It Doesn’t)

Cosigning isn’t always a mistake—but it should never be done casually.

When It Might Be Worth It

You fully trust the borrower: They have a steady income and a track record of responsible behavior.
You can afford to repay if needed: If things go wrong, covering the loan won’t wreck your finances.
You’re helping a child, spouse, or close family member: There’s a strong relationship and a shared interest in the outcome.

Red Flags to Watch For

The borrower has a history of missed payments: Past behavior is often the best predictor of future problems.
Your credit situation is fragile, or you plan to apply for new credit soon: A cosigned loan can lower your credit score or increase your debt load, making it harder to qualify for your own financing.

Alternatives to Cosigning a Loan

If you want to help someone financially but don’t want to risk your credit, here are some safer options.

Secure Loans With Collateral Instead

Encourage the borrower to apply for a secured loan, which uses a car or savings account as collateral. It may improve their chances of approval without needing a cosigner.

Help With a Down Payment or Monthly Payment (Without Cosigning)

You could offer to cover a portion of the down payment or help them temporarily with monthly payments. That way, you're supporting them without putting your credit report at risk.