The following question was sent to me via Facebook. If you’ve got a credit related question for me please submit it via Facebook or Twitter @johnulzheimer
Q: Hey John, what’s up? So check this out. My brother asked me to co-sign for him for an apartment. I wouldn’t be living there but his credit stinks and he can’t get an apartment, or anything else, on his own. I’m kicking around the idea of doing it because I want to help my brother but I’m not sure. What do you think? Is it dangerous? Ryan
A: Ryan you are a wise man to be concerned about co-signing for your brother’s apartment lease. Think of it this way…what can’t he get the lease on his own? I realize you already know the answer to that question but I need you to dissect the “why” a little more. He can’t get an apartment on his own because he is too risky and the apartment manager or owner isn’t willing to extend him credit (the lease) without more security. So, there’s a very good reason he isn’t able to get an apartment or anything else on his own…he isn’t creditworthy.
Now, on to your question about whether or not you should co-sign. I’m not in your shoes so I don’t understand all of the family dynamics at play but as an outsider with no dog in this fight I have the ability to say that there’s NO WAY you should co-sign for your brother or anyone else. Remember, a legitimate service provider (apartment) has determined that they are not willing to do business with him. Why should you?
Co-signing has real meaning in the world of credit and lending. If you were to co-sign you would become the co-obligor. That means when your brother stops paying his rent and gets kicked out of the apartment the collectors will go after him, and you. There is no such thing as co-signing just to get him the credit or apartment. It’s an actual obligation for which you are now responsible.
And if you don’t think the apartment complex will pursue you for payment when he defaults on his lease, consider this…according to the Federal Trade Commission’s website, “Studies of certain types of lenders show that for cosigned loans that go into default, as many as three out of four cosigners are asked to repay the loan.” This means any negative credit reporting will not only go on your brother’s credit reports but also your credit reports. That can include collections and judgments. And, in the worst case scenario your wages could get garnished to satisfy the defaulted debt. There’s just no good news when it comes to co-signing.
Frankly, asking someone to co-sign is a little like asking someone to help you pack up your house and move. It crosses the line between a reasonable request of a friend or relative and an unreasonable request.
Tell you brother “no”, your credit will thank you for it.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.