Qualifying

• Typically, lenders have minimum credit score requirements and borrowers cannot qualify for loans if their credit score falls short of the minimum required score. However, you can sometimes get around having a poor credit score if you add a cosigner to your loan. Some banks add the credit scores of the borrowers together and determine the average credit score of the borrowers and use that figure as the basis for approving or declining a loan application. Therefore, adding a cosigner can improve your chances of obtaining a loan.
  
  Additionally, if you do not have enough income to qualify for a loan, adding a cosigner may enable you to meet the bank's minimum income level for the loan.
  
  

Liability

• On a loan document, both the primary borrower and the cosigner agree to repay the debt. This means that if the loan goes into default, the lender can pursue both parties for the unpaid debt. The primary borrower has to contend with the risk of foreclosure on a loan secured by residential property, while the lender cannot seize the home of the cosigner. However, some states have recourse laws, which means that on a property secured loan the lender has the right to pursue borrowers for repayment of the debt beyond simply foreclosing on the home that secures the debt. The creditor could go to court and make a claim on the cosigner's cash assets.
  
  

Credit

• When you take out a loan as a cosigner, it appears on your credit report in the same way that it appears on a primary borrower's credit report. When you apply for new loans in your own right, lenders must take the loans that you have cosigned on into account when reviewing your income level. If you are on a limited income, cosigning for someone else's loan could make it difficult for you to qualify for other loans in the future. Additionally, late payments on the loan or a loan default have a negative impact on your credit score as well as the primary borrower's.
  
  

Considerations

• Many lenders do not allow cosigners on property loans on the basis that someone with no ownership rights to the collateral will have less of an incentive to repay the debt than the property owner. Lenders do not want situations arising in which a borrower who could not otherwise qualify for a loan has to rely on a cosigner who has no property on the line to cover the cost of the loan repayments. Nevertheless, the Federal Housing Administration allows cosigners on mortgages.