Can Someone with Bad Credit Cosign a Car Loan (2024)

FAQs

Can Someone with Bad Credit Cosign a Car Loan? ›

There are very rare cases where you may be able to cosign the loan, however 99times out of 100 you will not be able to cosign a car loan with bad credit. Cosigners are usually needed for people with bad credit.

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.

You can still be denied, but only in rare circ*mstances, most of which will likely not apply to a first-time borrower. A borrower with a poor credit history or negative financial situations, such as bankruptcies or repossessions, will have a harder time getting approved for a loan—even with a good co-signer.

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.

Sometimes lenders will deny a loan if the person has too much debt. Cosigning on student loans, a car loan, or a mortgage could add a significant amount of debt for the cosigner. If the cosigner thinks that they will need to apply for a large loan soon after cosigning, the cosigner could be denied.

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.

Whose credit score is used when buying a car with a co-signer? 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.

Good Credit Standing: The lender will ask permission to look at each person's credit scores and credit history. Proof of Ability to Pay: Your co-signer will be required to produce evidence of sufficient income and/or assets to cover the amount of the loan obligation, in the event the signer doesn't pay.

A co-signer is most helpful if their credit is at least better than the primary borrower's. A co-signer with a good credit score (690 or above) gives the borrower a better chance of approval and may get them a lower interest rate.

Co-signing means you are responsible for covering payments if the main borrower cannot, but you do not have any legal rights to the car. Co-owning means both parties have equal ownership and financial responsibility for the car.

Does cosigning hurt your credit? ›

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.

Generally, lenders want to see co-signers with high credit scores, blemish-free credit reports and long histories of consistent, on-time payments. They'll also want you to have steady employment and verifiable income.

You need to have more income than the primary borrower to be a personal loan cosigner, in most cases, and loans from some lenders have minimum income requirements as low as $10,500.

The quick answer is yes, but it's not as easy as you might think. "Lenders are generally averse to removing a co-signer," says Dean Kaplan, president of The Kaplan Group, a commercial debt collection agency. That's because by removing your name from the loan, the lender's risk goes up.

Acting as a co-signer can have serious financial consequences. First, co-signers assume legal responsibility for a debt. So, if the primary borrower is unable to pay as agreed, the co-signer may have to pay the full amount of what's owed. Second, a co-signed loan will appear on the co-signer's credit reports.

Yes, it is possible to get a car loan with a credit score of 500, but it can be infinitely more challenging to find a lender willing to approve the loan. A credit score of 500 is considered poor credit, and lenders will likely see you as a higher risk borrower.

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.

The cosigner is responsible for paying back loan if the primary signer stops paying or is unable to pay. The loan becomes part of the co-signer's credit history.

Banks or lenders will not accept an informal verbal agreement, or promise, from the cosigner on your behalf. The pledge and guarantee to pay must be in writing. In order for your cosigner to be accepted by the bank or lender, the cosigner is usually required to have a good or excellent personal credit rating.