If a student gets a car loan and it is co-signed by a relative, will this start to establish a credit rating for the student? Or doesn’t it count because the student doesn’t have the loan solely in her name?
What does this do to the co-signers credit? I would imagine it would lower it a few points because of the now greater amount potentially outstanding. True or not?
Yes. As long as the student’s name is on the loan.
All signees are accepting full responsibility for the loan. It can affect the more experienced lendee immediately in certain circumstances, but strictly speaking, cosigning a loan in itself will not necessarily hurt your credit.
When I got my first car loan, my credit wasn’t bad but my dad’s was phenominal. The dealer convinced us to put the car loan in my dad’s name with ME co-signing so we could get the financing based off his score but I would get the credit points on my credit report.
The “catch” was of course my dad had to trust me to make the loan payments and stuff. But that was pretty easy in our case. I had more to lose by screwing him over than I had to lose by screwing over Ford Credit.
Now with that awesome car loan experience on my credit report (even as the co-signer), I was able to get my home loan a couple years later (no co-sign) and 12 years later another car loan with a “going-to-heaven” credit score, as the dealer put it.
Anyway, either way you slice it, the loan counts towards both signers’ credit scores.
There is a TV show here that follows court bailiffs collecting debt. A recent episode showed them trying to collect £6000 plus from a couple who had guaranteed a loan to their waste-of-space son. They couldn’t believe that they stood to have their car lifted because the son had misses a few payments.
In the end they paid £3000 and agreed a plan for the balance. What struck me was that they had signed for the loan, without understanding that they were liable. (or at least that’s what they claimed).
Those guys love to lift, or threaten to lift, cars, because there is nothing like it for making people find money they swore they didn’t have.