Quick overview

Cosigning puts the loan on your credit reports and makes you legally responsible for repayment. In my practice, I’ve seen otherwise creditworthy cosigners blocked from mortgages or refinances after a cosigned account became delinquent — even when the primary borrower later caught up.

Key ways cosigning affects you

  • Credit reporting: The loan is reported to the three major bureaus in both the borrower’s and cosigner’s files. That means timely payments can help both parties; late payments or collections hurt both. (See CFPB guidance on cosigning and credit.) CFPB
  • Credit score: Payment history and utilization on the account feed your FICO/Vantage models. A single 30- or 60-day late payment can materially lower scores, while charged-off accounts or collections typically cause larger, longer-lasting drops.
  • Debt-to-income (DTI) and qualifying: Lenders may include the cosigned debt when calculating your DTI or monthly obligations, reducing your ability to qualify for new credit.
  • Legal liability and collections: If the borrower defaults, the lender can pursue the cosigner for the remaining balance, including late fees and collection costs. Collections show on your report and can last up to seven years from the date of first delinquency for most negative items under the Fair Credit Reporting Act. FTC — Credit reporting basics

How long the impact lasts

Negative items like late payments and collections generally remain on credit reports for up to seven years from first delinquency; bankruptcies can remain 7–10 years depending on type. Positive payment history can help over time, but the account itself often remains visible while it’s open and as a part of your credit history afterward. CFPB — your credit reports and scores

Before you cosign: practical checklist

  1. Review the loan contract and confirm whether the lender offers a cosigner-release option and its terms. See our guide on requesting a cosigner release for timing and lender requirements: How to Request a Cosigner Release: Timing and What Lenders Require.
  2. Pull your credit reports and check current DTI to know how the added loan will affect future borrowing.
  3. Get a written agreement with the primary borrower covering who pays, when you’ll be notified of missed payments, and repayment responsibility if they default.
  4. Consider alternatives such as helping the borrower build credit through secured credit cards, or acting as a guarantor with limited liability if the lender offers it.

After you cosign: steps to protect your credit

  • Enroll in account alerts and autopay to reduce missed payments.
  • Monitor your credit reports at least annually at AnnualCreditReport.gov and set up credit monitoring if possible. FTC/AnnualCreditReport.gov
  • If the borrower misses a payment, contact the lender immediately to understand options and consider making the payment to avoid a damaging derogatory mark; then seek reimbursement through your written agreement or small claims court if necessary.

Removing yourself from a cosigned loan

Common paths are:

  • Cosigner release: Some lenders allow a release after the borrower meets specific criteria (on-time payments, time elapsed). See our cosigner-release page for strategies: Cosigner Options: Release Clauses, Risks and How to Prepare.
  • Refinancing in the borrower’s name only: This substitutes a new loan without you on the note.
  • Paying off the loan yourself: That removes the liability but may not remove the account from your credit history sooner.

What to do if the borrower defaults

  1. Get documentation from the lender on the debt and amounts owed.
  2. Try to negotiate payment plans or a settlement with the lender—collections often accept lump-sum settlements.
  3. If you pay to protect credit, get a written reimbursement agreement.
  4. Know your rights under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act; dispute inaccurate items with the credit bureaus. Consumer Financial Protection Bureau — debt collection

Real-world note

A retiree I worked with cosigned an auto loan and later couldn’t refinance her mortgage after the cosigned account went delinquent. She avoided a charge-off by stepping in to make payments, but her DTI and recent derogatory history still delayed new credit for years. That client’s case highlights why a formal repayment plan and monitoring are essential.

Common misconceptions

  • Myth: Cosigning won’t affect my credit unless the borrower tells the lender. Fact: The account is reported on both files automatically; furnishers report accounts to all bureaus.
  • Myth: You can easily remove yourself from a cosigned loan. Fact: Removal usually requires lender approval via refinance or a cosigner release clause.

Professional disclaimer

This article is educational and not personalized legal or financial advice. For decisions that affect your credit or legal liability, consult a qualified attorney or financial advisor who can review your specific circumstances.

Authoritative sources

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