Property management & leasing
Co-Signer: Definition & Example
Also called: Cosigner
What Is a Co-Signer?
A co-signer is a person who signs a lease or loan with the primary applicant and becomes legally responsible for the debt if the primary applicant does not pay.
What does co-signer mean?
A co-signer adds their income and credit history to an application that might not qualify on its own. Lenders and landlords accept a co-signer because it gives them a second person to collect from.
For loans, the Federal Trade Commission warns that a co-signer may have to pay the full amount owed, plus late fees or collection costs, and the loan can appear on the co-signer’s credit report. For leases, the co-signer’s liability depends on what they sign, but it commonly covers unpaid rent and damages for the full lease term.
The terms co-signer and guarantor are often used interchangeably. In rentals, a co-signer typically signs the lease itself, while a guarantor signs a separate guaranty. Both usually go through income and credit screening.
Co-signer example
A recent graduate wants to lease a car but has little credit history. Her aunt co-signs the loan. When the graduate misses two payments, the lender reports the late payments on both of their credit reports and asks the aunt to bring the account current.
Related terms
- GuarantorA guarantor is a person who signs an agreement promising to pay a tenant’s or borrower’s obligations, such as rent, if the tenant or borrower does not pay.
- Co-ApplicantA co-applicant is a second person who applies alongside the main applicant and will share legal responsibility for the lease or loan if it is approved.
- CreditworthinessCreditworthiness is a lender’s judgment of how likely a person or business is to repay borrowed money on time, based on credit history, income, debts, and assets.
- Credit ScoreA credit score is a three-digit number, usually from 300 to 850, that estimates how likely a person is to repay debt based on the information in their credit report.
- Proof of IncomeProof of income is documentation showing how much money a person earns, such as pay stubs, tax returns, bank statements, an employer letter, or a benefits statement.
Co-signer FAQ
- Does co-signing affect your credit?
- It can. The debt may appear on the co-signer’s credit report, and missed payments by the primary borrower can lower the co-signer’s credit score.
- Can a co-signer be removed from a lease?
- Only if the landlord agrees, usually through a lease amendment or a new lease. Removing a co-signer normally requires the tenant to qualify alone.
