More than one-third of people who co-sign for someone else’s loan or credit card end up literally paying for it, a new survey shows.
CreditCards.com’s survey of 2,003 adults living in the U.S. found that 38 percent of co-signers had to pay all or some of the debt because the primary borrower failed to pay it.
The repercussions for co-signers don’t stop there, though. The poll also found that:
28 percent experienced a drop in their credit score because the person they co-signed for paid late or not at all.
26 percent said the co-signing experience hurt their relationship with the person they co-signed for.
As we’ve explained in stories like “Answers to 10 Key Questions About Credit Cards,” co-signing is risky not only for your pocketbook but also for your credit score. If the primary borrower makes late payments — which you may never know — it could hurt your credit score.
Bottom line: You shouldn’t co-sign unless you’re ready and able to assume the debt as your own in the event your co-signer — for whatever reason — can’t pay.
The survey found that 17 percent of adults reported having co-signed for a loan or credit card. Co-signers tend to be:
At least 50 years old: Most co-signers are 50 to 64 years old (accounting for 24 percent of co-signers).
Wealthy: 24 percent of people who earn more than $75,000 annually have co-signed, compared with 11 percent of people who earn less than $30,000.
Helping a child or stepchild: Co-signers most commonly co-signed for a child or stepchild (45 percent), followed by a friend (21 percent).
Signing for an auto loan: People are most likely to co-sign for auto loans (51 percent of all co-signings), personal loans (24 percent), student loans (19 percent) and credit cards (16 percent).
For another reason why you should reconsider becoming a co-signer, check out “How and Why to Keep a Stellar Credit Score in Retirement.”
If you or someone you know is struggling with common types of debt or is prepared to take on new debt, check out:
Are you surprised to learn how often co-signing ends up hurting co-signers’ wallets or credit scores? Share your thoughts below or over on our Facebook page.