Does Cosigning Affect Your Credit? Understand the Risks
6 Min Read | Published: June 20, 2025
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How does cosigning affect your credit? Get expert tips on managing risks as a cosigner and explore alternatives for safer lending options.
At-A-Glance
- Cosigning means you could be legally responsible for any debt a primary borrower can’t or won’t pay, impacting your credit scores if the debt falls back on you.
- While cosigning could help a friend or relative advance financially, you may want to avoid getting involved if you can’t trust the borrower or afford to cover the debt.
- You may want to consider cosigning alternatives, which could carry less risk.
You may have recently been asked to cosign for a rental agreement, credit card, home loan, or car loan. You may even be a primary borrower searching for a cosigner for your student loans. No matter your role on a credit application, understanding the implications of cosigning can help you to make an informed decision about whether it’s right for you.
Keep reading to learn about the cosigning process, its potential impact on credit scores, and check out alternatives to cosigning, like first-time credit cards.
How Does Cosigning Work?
Some borrowers may have weak credit standing, whether they’re just starting to build credit or they’re in the process of repairing it. In those cases, having a cosigner with a credit score of 670 or above may strengthen their loan or credit card application.1 If you become a cosigner for a credit card or any other type of loan, you agree to pay for the primary signer’s balances if they can’t pay.
Does Cosigning Affect Your Credit?
Unfortunately, cosigning for credit cards or home and auto loans may have serious legal and financial consequences for the cosigner if the primary borrower cannot pay. If the debt isn’t paid on time, lenders could file a lawsuit against you, and you could end up being responsible for attorney fees and court costs as well.2
Here are a few risks of cosigning:
- It Could Impact Your Credit
If the lender or card issuer approves the primary signer’s application, the account may appear on the cosigner’s credit report. If the issuer rejects the loan application, it may still result in a hard inquiry on your credit report. Likewise, late payments could negatively impact your credit as well. - You May Incur a Higher Debt-to-Income Ratio
When certain types of lenders look at your debt-to-income (DTI) ratio to help determine risk, they may consider various loans and forms of credit, like revolving card balances, and the minimum monthly payments you’re obligated to make. If your DTI rises significantly after cosigning, you could have more trouble getting approved for additional credit cards or loans. - Family and Friend Dynamics Could Be Strained
If the primary borrower fails to pay, the financial responsibility you’ll absorb could complicate your relationship and create tension in your family or social dynamics.
When Should You Cosign?
Since cosigning could negatively affect your credit and relationships, it often requires trust and strong communication. That’s why cosigners may be the primary signer’s close friends or family members. Here are some cases where cosigning may be a good idea:
- The Primary Borrower Is Financially Stable and Trustworthy
If someone you trust needs a cosigner and you feel confident they will make payments on time, it may be worth cosigning for them. If you ensure on-time payments are made, you could see a stronger payment history on your credit report, which might help your credit score and future loan approval odds. - You Are Prepared to Step in Financially
If you communicate well with the primary signer and are prepared to step in financially if the need arises, you could support their credit growth and help them save on interest without risking your credit. - You’re a Parent Cosigning for a College-Bound Child
Cosigning for a college-bound child could help them start building credit and offer long-term financial benefits if their career takes off. If you’re cosigning a student loan, you may feel more comfortable signing if there’s a cosigner release agreement, which could facilitate removing yourself from the loan if necessary.3
Cosigning Alternatives
Cosigning isn’t the only way to help a close friend or loved one. There are a number of alternatives to cosigning that you could explore. These include lending money directly, looking into alternative loans or credit cards, and more:
- Weigh the Pros and Cons of Lending Money From Your Savings
Lending money from your traditional or high-yield savings account (HYSA) to a family member or friend could remove any direct negative effects on your credit due to the primary signer’s failure to pay bills on time. However, there’s always the risk that you may not get paid back, so carefully weigh the risks before going this route. - Encourage the Primary Borrower to Explore Secured or Personal Loans
If the primary borrower earns a sufficient income, they may qualify for a secured or personal loan despite having new or poor credit and no cosigner. - Consider Adding the Primary Borrower as an Authorized User on Your Credit Card
If you’re a primary cardholder, you can add a secondary user to your credit card instead. This could be a good way to help a loved one build credit if they can’t get a credit card on their own. While the authorized user may agree to pay for everything they purchase, you still maintain legal responsibility for all charges and balances. - See If the Primary Borrower Qualifies for a Credit Card
There are credit cards for building credit from scratch that a primary borrower may qualify for. These cards can range from retailer credit cards, secured cards that require a deposit, or even student cards from lenders who might overlook a limited credit history.
Did you know?
See personalized Credit Card offers from American Express® with no initial hard credit check and no initial impact to your credit score. A hard inquiry only occurs if you apply, get approved for, and choose to accept an offer.
Frequently Asked Questions
Removing yourself as a cosigner may be possible, but it isn’t always smooth. Typically, the primary borrower will need to agree to remove you as a cosigner, and the lender may need to issue a new agreement as well.4
Unless you can legally remove yourself from the loan, you’re usually liable as a cosigner for the duration of the debt’s lifetime. If you’re cosigning a large loan, you may want to consider an indemnification agreement, which could help to ensure you are reimbursed for challenges you face should the cosigner default on the loan.5
If your cosigner has a high income but a poor credit score, lenders may not feel their signature decreases the risk involved. However, this will vary depending on the lender. Some lenders will also consider income levels when assessing applications.
The Takeaway
Even though cosigning could open financial doors for your loved ones, sharing financial and legal responsibility for a loan could negatively impact your relationships and creditworthiness. Lower-risk alternatives like securing a credit-building card or a personal loan may be a better option for a relative or friend requesting your signature.
1 “What Credit Score Does a Cosigner Need?,” Experian
2 “What to Do if You Cosign for Someone and They Default,” Experian
3,4 “How to Remove Yourself as a Co-Signer on a Loan,” U.S. News - Money
5 “Cosigner rights & responsibilities: How cosigning works,” Bankrate
Liv Gillespie is a Philadelphia-based writer with a double M.A. in English Linguistics & Literature and Secondary Education. Her work focuses on personal finance.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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