This guest post provided by Sensa.
Co-signing on a loan is a very serious financial commitment that should be heavily considered. Co-signing on a loan means that the original borrower (probably your friend or relative,) was turned down by the lender, therefore the co-signer is responsible for guaranteeing the loan. In other words, if the borrower misses payments or defaults on the loan, it is the cosigner who is responsible for paying the remainder of the loan.
Studies conducted among certain types of lenders revealed that of all the co-signed loans that go to default, as many as three out of four co-signers are required to repay the loan (source: Federal Trade Commission). Furthermore, if the borrower defaults on the loan, the lender will come after you, the co-signer first. Often when the loan goes to collections, this is the first sign of trouble the co-signer sees and it will significantly and negatively impact the co-signers credit standing. So, when you co-signed, you thought you were doing your friend or loved one a favor, but if they default you are looking at bad credit repair for yourself. Not only will you be looking at credit repair, you could be responsible for late fees, have your wages garnished, lose property used as collateral, be sued and finally your relationship with the borrower may be forever damaged.
If you find yourself on the bad end of a co-signer situation with negatives on your credit report, fixing credit should be a priority.