Home > Mortgages > Do I Need a Cosigner?

Comments 0 Comments

So you’ve just applied for a new apartment, but the leasing office tells you that you’ll be needing a cosigner in order to sign your lease and move in. Why is this happening? Let’s explore the ins and outs of having a cosigner.

What is a Cosigner?

A cosigner is a person who has agreed to take responsibility for your payments in the event that you default on a loan or do not pay your rent. Your cosigner will then be legally liable for making these payments, and not doing so could cause long-term damage to their credit as well. Since banks and landlords know these people are financially responsible, they will accept cosigners to ensure they are paid.

But, why might you need a cosigner?

Why Do I Need a Cosigner?

When you apply for a loan, apartment, or mortgage, the lender or landlord takes two major factors into account: your income and your credit report.

If your reported income or credit score are below a set threshold, a lender or landlord will usually require you to find a cosigner. This provides them with peace of mind about lending you money or allowing you to move into one of their properties, because it lowers the risk of default.

  • Credit
    Credit scores exist on a scale, usually ranging from 500-800, or sometimes as high as 900, depending on the formula used. Any score above 700 is generally seen as a good credit score, but many factors can affect this number. If your score is below 700, and your income isn’t sufficient, you may be asked to get a cosigner.
  • Income
    Income is a major factor in determining your need for a cosigner. For example, when you rent an apartment, many property management companies require that your rent not cost you more than one-third of your income. If the lease you want to sign exceeds that amount, they may ask you to find a cosigner.

Who Can be my Cosigner?

Pretty much anyone in good credit standing can be your cosigner, but you should be careful who you ask. Family members are usually a good place to start, especially for young adults who wish to take out private education loans or move into their first apartments. Be warned, however, that defaulting on a loan can cause irreparable damage to your relationship with your cosigner.

There are two things to consider before asking someone to cosign on a loan for you:

  • Can I avoid taking out this line of credit?
    If you can avoid taking out the line of credit altogether, then you should do so until you are in a better financial position and can qualify for it on your own.
  • Can I wait to take out this line of credit?
    If you can’t avoid taking out the line of credit, can it be put off for a few months? If so, there are many things you can do to repair your credit in the meantime, and perhaps avoid having to ask your Uncle John to be your cosigner.

How Can I Repair my Credit Sufficiently so I Don’t Need a Cosigner?

If you can wait to take out your line of credit or move into that apartment, take some time to repair your credit. Here are some ways to do so in a short period of time:

  • Pay down debt
    An easy way to increase your credit score is to pay down some outstanding debt. If you have credit cards with small balances, pay them off if you can.
  • Open a low-limit credit card
    It may seem counterintuitive to open MORE credit if your credit is lacking, but opening up a card with a very small limit can help you in the long run, provided you pay it off every single month. That’s because it lowers your debt utilization ratio. Maybe you can put one tank of gas on this card every month and pay it off as soon as the statement arrives.
  • Pick up a side hustle
    A second job would definitely give you a boost in income, possibly eliminating the need for a cosigner because it increases your debt-to-income ratio.
  • Ask to be put on someone else’s account
    If you have generous parents, grandparents, or aunts or uncles with good credit, consider asking one of them to add you to a long-standing credit card (as opposed to becoming your cosigner). They don’t have to actually give you a card, but it will still show up on your credit report, giving you an almost-immediate boost.

If you do end up asking someone to cosign on a loan or apartment for you, there will come a day when you can release them. Each lender or landlord will have different requirements for releasing a cosigner, but it can usually be done after a period of time, provided your account has remained in good standing, and your payments are all made in-full and on time.

When you sign the paperwork for your loan or lease, there may be a provision for dropping the cosigner, which you should do as soon as possible. If there is no provision, ask your lender about it. If they cannot allow you to drop the cosigner, and that’s something that is important to you, you may need to find a new lender or explore eventual refinancing options down the road.

So, when you are ready to apply for a loan or new apartment, and you need a cosigner, you now have a better idea of what that means, both for you and for the person agreeing to be held legally responsible for your outstanding debt.

For more information about repairing your credit to avoid having to ask someone you love to be a cosigner, visit www.credit.com, where you can also get a free credit report.

If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team