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I have a higher credit score than my cosigner. But my cosigner has a low score but more history.?

Josh S - 2007-10-05 16:04:29 - Personal Finance

I've been trying to get a car loan but i keep getting denied. My credit score is 720 no blemishes. The problem is i have only one year of history and 1 month of loan history. Not enough to get a loan. So I still need a cosigner. But the only person who can cosign for me is my mom who has a credit score of 560. Shes is a homeowner. The only reason her score is low is because of my student loans and a some late payments. No bankruptcys or collections or anything like that. Would it be worth a try to apply for a loan with her as my cosigner, or would they deny it because she is already overextended?

Best Answer:

Just having any co-signer does not automatically mean you can get the loan. When a person co-signs for the loan that person is saying they can take over the loan if you don't. So they not only need a good score but the ability to repay it if you can't. With her having a score of 560, IF you are able to get a loan it will be at a very high interest rate. So if they were denying you strictly on your history and not income, you will probably either need to continue on what you are doing and wait a few months. The other thing to do would be to work on improving your mom's credit. Also, if she has a score of 560 with no collection accounts she probably has more than just "some" late payments. One thing to look at is her credit utilization, if she is using more than 30% of her credit cards limits that is hurting her score. One thing I do not think is hurting her score is YOUR student loans. The only way it would hurt her is if she co-signed on the loans and you were late. But since you said you had no blemishes(late payments) then that should not be effecting her score. In fact if your loans are current that is probably helping her score if anything.

Answers:

sometimes the bank wants 2 people on the hook for the same loan due to investors backing the loan don't want to approve you with your short credit history....if you dont want two signers, let the cosigner apply by him/her self and get the loan and sell the car to you on payments.

Her score is better then yours. I would use her as a co-signer. The reason your score is so high is because they only have maybe a 200 dollar credit card to report it against. Once you get your car it will drop. It was funny I was doing a loan once and this guy was being all arrogant, he and his new wife were getting a home loan. She was 620 and he was 780. He said the only reason we got this loan was because of me. I said wait till the mortgage hits, your highest loan ever was 1000 dollars. A month later he was at 550. As I said use her if you can, her credit is 10 times better then yours. She has proven to handle something more then a 100 dollar debt. Good Luck

Just having any co-signer does not automatically mean you can get the loan. When a person co-signs for the loan that person is saying they can take over the loan if you don't. So they not only need a good score but the ability to repay it if you can't. With her having a score of 560, IF you are able to get a loan it will be at a very high interest rate. So if they were denying you strictly on your history and not income, you will probably either need to continue on what you are doing and wait a few months. The other thing to do would be to work on improving your mom's credit. Also, if she has a score of 560 with no collection accounts she probably has more than just "some" late payments. One thing to look at is her credit utilization, if she is using more than 30% of her credit cards limits that is hurting her score. One thing I do not think is hurting her score is YOUR student loans. The only way it would hurt her is if she co-signed on the loans and you were late. But since you said you had no blemishes(late payments) then that should not be effecting her score. In fact if your loans are current that is probably helping her score if anything.

If your score is 700+ and you can't get a loan, the problem is your INCOME. 700 is a very good score. If you are being turned down because of your income, you WILL default on the loan. IF YOU have student loans, they don't effect your mothers credit score. If SHE took loans to pay your tuition, they are NOT student loans. What you need is a car you can pay CASH for. A 'garage sale' car will cost about $1000. Save the money you won't spend on payments and you will be able to upgrade to a $4,000 car inside a year.

Do not borrow money on a car. Do not ever pay interest on a depreciating asset. Save up some money and sell some things and pay cash. Then start making yourself a small car payment and you can upgrade as you go, all along avoiding paying someone else interest. Start good habits like this at an early age you can build wealth throughout your lifetime.

Unfortunately you can be the most stable person in the country financially paying your way all the time by cash but as far as credit companies go they have no idea what you will be like as a payer, that is why these days even if you have money and you pay cash if you know that some time in the future you would like something on finance then you would have to get a credit rating, which a lot of people do not like doing because the only way to do it is to have credit cards maybe a small loan and shown on the credit checking system to be paying regularly. Ken