If my boyfriend got denied for a $7,000 loan because of bad credit, will cosign with perfect credit help?
Posted by | Posted in Credit Help | Posted on 29-06-2010-05-2008
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He got denied for a few different loans in the past month. He tried for a home equity loan, a personal loan and he cannot refinance on the house. We got behind because of the economy and his hours being cut at work. He is getting the loan to pay off all the bills that are getting in the way of him being able to manage all of them and then just having that one payment to take care of for the loan at his bank that he is trying to apply for. He is still paying on a loan (3,000) that he had been approved for 1 1/2-2 years ago. He has ALWAYS been on time with paying that bill, because he never knew when he would need one again. He very rarely has overdrafts either. With his credit being bad and having a friend/family member (not sure which one, because the agreement was not to tell he was helping AND my boyfriend offered him 0 just for his signature). Will this person having PERFECT credit help with him getting approved. Thanks so much 
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Having a co-signer with good credit will probably get the loan approved. However, the interest rates will be based on the boyfriend’s poor rating. The loan will show on the boyfriend and the co-signer’s credit reports and both will be equally responsible for the debt.
It is an extremely bad idea on the part of the co-signer with good credit. People need co-signers because they have already trashed their own credit and won’t hesitate to trash a co-signers. NEVER, EVER co-sign anything with anyone you are not legally married to. It never turns out well.
By the way, the boyfriend doesn’t appear to have much in the way of financial management skills. Economy and hours cut may be the excuse, but he overextended himself and didn’t have savings to fall back on. He’s already got one personal loan (undoubtedly to pay off debts) and seems to have ran those debts back up again.
I also have real problems with "He very rarely has overdrafts either." Rarely overdrafting your bank account is like being a little bit pregnant — he still overdrafts. Overdrafting your bank account is not a normal, acceptable thing, even if it’s only every now and then.
Most creditors know that co-signors don’t pay. Co-signors are normally used to help people with limited credit, not people with bad credit.
It also depends on the income of both the applicant and co-applicant. I think he should only give him the $500 if he gets approved, as there are many variables the bank will look at that your friend has no control over.
It only makes sense to consolidate bills into a loan if the fees and interest are better than the current situation – plus $500 in this situation. Otherwise, he’s paying a premium to make out one payment each month instead of a few. Yes, having someone with great credit cosign the loan will improve his chances of being approved, but that puts that person’s stellar credit rating on the line. They will be responsible for making payments if he defaults.
"Rarely has overdrafts" leads me to believe he does not have control of his finances. It’s time for him to get a better job and/or get a second job. To get control, he needs to make a budget and live within his means. Check out DaveRamsey.com for lots of personal finance advice.
Yes, Your good credit will probably help, but that’s not really the point in being a cosigner. The first payment on that loan will come due 30 days after he gets it. Can he make that payment, plus all his other bills, each & every month until it is paid off??? His credit history suggests no. Don’t cosign just because he is your boyfriend, use the same judgment the banks use. Instead of a loan, use your knowledge of finance & get him organized so that bills are paid on time & reduce his current debt. You can always apply for a loan latter.
My saying will always be the same. Never co-sign for friends or family because in most cases, it’s never paid back. By the time you find out he defaulted, the damage already hit your credit report.
Because you co sign,you will be the one paying it off. Your friendship will be gone as well
You can use this credit monitoring service to pre-estimate future scores for different scenarios of such payments – credit-report-free.totalh.com
From experience, being the one with the good credit. My girlfriend tried to take out a bank loan and was denied due to bad credit, I then cosigned and tried again, was accepted but at a high interest rate. I then tried taking out the loan for her in my name alone and got the loan with a great rate. Put yourself in the lenders shoes, what would you do if someone came in with bad credit and got a cosigner with good credit? This was about 5 years ago, I am a bit wiser now and do not borrow from the bank, instead I borrow from groups of people that have the money to lend at a lower interest rate than what my bank offers me. It is all about spreading the risk, the more people that fund your loan the less risk there is to the lenders, which in turn gives you a lower interest rate.
I learned this from a great sources.
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