There are several facts you should know if you are a Co-Signer for an apartment. You are assuming the financial responsibilities of renting that apartment.
Deciding to co-sign an apartment for a friend or family member is a big decision that comes with risks to your finances and credit scores. You may be co-signing for someone that has a thin credit file or someone in a need of a credit fix.
Sensitive questions must be asked prior to co-signing for an apartment to give you a better picture of who they’ll be as a renter.
Make sure you know their spending habits very well. Can they afford the monthly rent? Do they manage money well? Are their bills paid on time? Do they have a consistent source of income?
These are vital questions because it’s a reason why a co-signer is needed in the first place.
5 facts about being a co-signer for an apartment
1. You are 100% responsible for that rent. When you act as a co-signer, you help another person qualify for the apartment but it also means you have to put your own finances on the line. As a co-signer, you’re actually committing to being 100% responsible for that debt if a rental payment is not made.
2. Co-signer’s credit will be pulled. If you become a co-signer, you are required to complete a rental application along with the person you are co-signing for which means your credit history will be pulled. This will be a hard credit pull that can result in several points taken off your credit scores.
3. Your credit could be ruined. You will be held responsible for a co-signed apartment if the renter does not pay. If the landlord reports monthly payments to the credit bureaus, any late payment will be part of your credit history. Plus, when the renter misses a payment, the landlord can come after you because you agreed to be legally and financially responsible for the apartment lease.
For many people, this aspect of co-signing is enough of a drawback to avoid it altogether, even if it will help someone out. Any type of collection effort to recover unpaid rent will negatively affect your credit history and scores.
4. Legal action can be taken against you. Since co-signing means you are equally responsible for the debt, any court action such as an unlawful detainer will impact you. That includes a judgment reporting in your credit files plus any efforts to recover the unpaid rent like wage or bank account garnishing.
5. Negative impact on the relationship. In the event the person you co-sign on behalf of ends up defaulting on rental payments, your relationship could be ruined. What if you have to nag the friend or family member about making timely rent payments each month? Even if it’s your child, getting stuck paying rent for an apartment you don’t live in may cause irreparable damage to your relationship.
Final thoughts on co-signing for an apartment
Co-signing is a big commitment. If default occurs, you could end up paying a debt you didn’t incur and losing a cherished relationship. Weigh the pros and cons prior to signing on the dotted line. If your concerns outweigh the benefits, it might be better to consider other ways to help that person in need of a co-signer.