Can I Cosign a Loan With Bad Credit? (2024)

FAQs

Can I Cosign a Loan With Bad Credit? ›

Although requirements can vary by lender, a cosigner typically needs to have good to excellent credit (670 and up) to cosign a loan or credit line. Lenders look at a cosigner's credit score and report as well as their income and assets to determine whether they qualify for a loan.

While each lender has its own credit requirements, most expect a cosigner to have good credit with at least a 670 credit score.

If you have bad credit or a limited credit history, applying for a personal loan with a co-signer or co-borrower can help you access cash you may not qualify for on your own. A co-signer is someone who agrees to be responsible for a loan, but who doesn't have access to the funds.

While having a co-signer does not guarantee you will be approved, if they have a high credit score and good credit history, lenders are far more likely to trust you as a borrower. If you have questions about what kind of co-signer will help you, talking with an auto advisor like the ones at IMCU can help immensely.

Being a co-signer itself does not affect your credit score. Your score may, however, be negatively affected if the main account holder misses payments.

Lenders can consider the credit scores of both borrowers when co-signing an auto loan. If you have a lower credit score, having a co-signer with a higher score could work in your favor. In terms of which credit-scoring model is used for approvals, that can vary by lender.

Generally, a cosigner is only needed when your credit score or income may not be strong enough to meet a financial institution's underwriting guidelines. If you have a stronger credit score, typically 650 and above, along with sufficient income to cover the loan payment, it's likely you will not need a co-signer.

Co-signers typically need a credit score of 670 or higher and a debt-to-income ratio of less than 50% to be approved for the loan.

You don't meet the income requirements

The lender will only consider your income when determining whether you meet the requirements. Your co-signer's income will not factor into this part of the application. So, a co-signer with bad credit but good income won't help with approval or better rates.

In addition to using friends or family, there are also services that offer to match you with a co-signer. In this case, you sign up to have someone act as your co-signer. However, you normally need to pay a fee for this service. The fee depends on the size of the loan, your credit situation, and other factors.

Does a cosigner have to show proof of income? ›

To qualify as a cosigner, you'll need to provide financial documentation with the same information needed when you apply for a loan. This may include: Income verification. You may need to provide income tax returns, pay stubs, W2 forms or other documentation.

Fortunately, you can have your name removed, but you will have to take the appropriate steps depending on the cosigned loan type. Basically, you have two options: You can enable the main borrower to assume total control of the debt or you can get rid of the debt entirely.

Each auto lender has its own credit requirements, but typically a cosigner needs a credit score of 670 or more. Lenders also calculate the cosigner's debt-to-income ratio (DTI), which measures how much of their income goes to pay debt.

What credit score is needed for a co-signer? As a co-signer, you stand in the primary applicant's place during the approval process. You'll need a minimum 580 median score for an FHA or VA loan. For a conventional loan, Rocket Mortgage^® requires a qualifying score of 620.

Typically private lenders look for borrowers or co-signers with a steady income and a credit score of at least 670 on a 300-850 scale used by FICO, the most widely known credit score.

According to NerdWallet, the exact credit score you need to lease a car varies from dealership to dealership. The typical minimum for most dealerships is 620. A score between 620 and 679 is near ideal and a score between 680 and 739 is considered ideal by most automotive dealerships.