Before You Co-Sign: What to Check About the Borrower

Before you cosign a loan, look at the borrower’s credit the way the lender did, because the lender already looked and, in most cases, decided this person was too risky to approve alone. That’s usually why they asked for you. With the borrower’s permission, check their payment history, how much they owe, and why their file wasn’t strong enough by itself. Then read the cosigner notice and ask the lender about release terms.

That might sound cold when it’s your daughter, your best friend or your brother asking. It’s not. It’s the kindest version of yes, because it’s a yes you can actually keep.

What you’re agreeing to (it’s more than a favor)

Lenders covered by the FTC’s Credit Practices Rule must give co-signers a separate written notice before they sign. The required wording, set out in 16 CFR 444.3, is blunt in a way most loan paperwork isn’t:

“You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn’t pay the debt, you will have to.”

It goes on to say you may owe the full amount plus late fees and collection costs, that the creditor can come after you without first trying to collect from the borrower, and that a default can end up on your credit record. Some states require creditors to pursue the borrower first, but don’t count on it.

Then there’s what the notice doesn’t say. The loan usually shows up on your credit report as your debt, even when the borrower pays on time. That matters if you’re planning your own mortgage, car loan or refinance.

A quick example. A $28,000 car loan at 9% for 72 months has a payment of about $505 a month. If you earn $6,000 a month before taxes, that loan adds roughly 8 percentage points to your debt-to-income ratio, whether or not you ever pay a dollar of it. Some mortgage guidelines let you leave a co-signed debt out if you can document that the other person has made the payments for the past 12 months. Until then, it’s yours on paper.

How to ask to see their credit

Ask directly and make it normal. Something like: “I’m happy to help. Before I sign, can I see your credit? It’s a soft check, it won’t affect your score, and it helps me understand what I’m signing up for.”

Get the yes in writing (a text is fine). Checking someone’s credit needs a permissible purpose under federal law, and their written OK is the simplest one. Our explainer on permissible purpose has the details, and getting written consent has a short template.

If they’d rather pull their own free report and show you, that works too. What doesn’t work is skipping the step because asking feels awkward. A borrower who won’t let the person guaranteeing the debt see their credit is telling you something important.

Seven things to check before you cosign a loan

A soft-pull lookup gives you the borrower’s FICO® Score 4 from TransUnion plus a credit profile: total debt, credit usage, payment track record, and the top reasons the score isn’t higher. Read it as a co-signer would, roughly in this order.

1. Why they need a co-signer in the first place

Start here. The answer reframes everything else on the report.

They have a thin file. Young adults, recent immigrants and people who’ve always paid cash often have little or no credit history. The lender isn’t saying they’re irresponsible. It’s saying it doesn’t have enough data yet. That’s a much lower-risk situation. Our post on thin credit files explains why “no score” isn’t the same as “bad score.”

They have a bad file. Late payments, collections, maxed-out cards. The lender has evidence they struggle to pay. You’re being asked to back a pattern that already exists.

The top factors that come back with a score usually tell you which one you’re dealing with. “Length of time accounts have been established” points to a thin file. “Serious delinquency” points to the other kind.

2. Payment history in the last two years

Payment history is the largest factor in FICO scores, about 35% for most people. For a co-signer it’s even more important than that number suggests, because late payments on this loan will land on your report too.

One 30-day late from three years ago, during a job change? Life happens. Several lates in the past 12 months, or anything 90 days or more? That’s the pattern you’d inherit.

3. How much of their available credit they’re using

A person using 85% of their credit card limits is under financial pressure, even with a decent score. Add a new car payment and something has to give. Look at overall credit usage and total debt. The guide to credit utilization explains what the ratios mean.

4. Collections and charge-offs

Open collections mean someone already gave up on getting paid through normal billing. Ask about them. Medical collections from a hospital billing mess are a very different story from a phone bill they walked away from.

5. Recent new accounts and inquiries

A cluster of new accounts or applications in the last few months can mean someone is borrowing to stay afloat. It can also just mean they’ve been shopping for this exact loan, which is normal. Ask.

6. Whether the payment fits their actual income

Credit reports don’t show income. So ask plainly: what’s your take-home pay, and what are your fixed bills? If a $505 car payment plus insurance would eat 30% of their take-home pay, it doesn’t matter how good their score is. That’s how good people end up 60 days late.

7. What happens if their situation changes

Job loss, a move, a breakup, a new baby. A 72-month loan runs for six years. Ask how they’d handle a few tight months, and whether there’s any emergency savings. You’re not interrogating them. You’re thinking through the same scenario the lender already priced in when it asked for you.

Questions for the lender, before anything is signed

The borrower’s credit is half the picture. The other half is the loan itself.

• Can I get the notice to cosigner and the full loan terms now? Read the payment, rate, term and fees. If you wouldn’t take this loan yourself, think twice about guaranteeing it.
• Is there a co-signer release, and what exactly triggers it? Get it in writing. Release programs exist, especially for private student loans, but they’re hard to use. In 2015 the CFPB reported that 90% of borrowers who applied for a co-signer release were rejected, often because they hadn’t met requirements nobody explained clearly.
• Will you send me statements or alert me to a missed payment? Many lenders will if you ask. A text the day a payment is missed gives you time to fix it before it’s 30 days late and on your report.
• Am I a co-signer or a co-borrower? On a car loan, a co-borrower usually goes on the title. A co-signer usually doesn’t. If you’re guaranteeing a $28,000 car, it might make sense to have your name on it.

If you decide to go ahead

Keep the setup simple and visible.

Set up online access to the account so you can see payments yourself. Check your own credit report regularly. You can get free reports at AnnualCreditReport.com, and a co-signed loan will show up there. Agree with the borrower, out loud and ideally in writing, on what happens if they can’t make a payment. “Call me before it’s late, not after” covers most of it.

And keep the payment amount in your own budget, at least mentally. If you’d struggle to pay it for three months while they sort things out, the loan is too big for you to co-sign.

Ways to help without co-signing

Sometimes the honest answer is “not this loan, but let me help another way.”

• A smaller loan or a cheaper car. Many co-sign requests are really “help me afford more than I should.”
• A secured credit card or credit-builder loan for someone with a thin file. Six to twelve months of on-time payments can change what they qualify for.
• A direct loan from you, with written terms. You stay in control of the risk. Read lending money to a friend first.
• Helping with a larger down payment instead of guaranteeing the whole balance.

If you’re not sure how a score and a report relate, our credit report vs. credit score guide is a good starting point. The FAQ covers how soft pulls work and what the person you check will and won’t see. And whatever you decide, having looked at the numbers together usually makes the conversation easier, not harder. A yes based on facts is one you won’t resent, and a no based on facts is one they can understand.

You can start a lookup from our home page with just their phone number.