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What is the Effect of Co-signing a Student Loan on My FICO Score?

written by: Kristie Lorette•edited by: Doreen Martel•updated: 4/28/2011

Before you sign on the dotted line to help someone get a student loan, find out the effect of co-signing student loan on FICo score. Lowering your credit score can change credit and loan opportunities in your future, so it's important to know if and how co-signing changes your score.

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    Student loans and college tend to go hand in hand, but taking out loans is a responsibility. While there are several different credit scores, the FICO score is the one primarily used by banks and lenders around the country. A co-signor of any type of loan is just as responsible for the student loan as the primary borrower. This means that the effect of co-signing student loan on FICO score is similar to that when you take on your own debt.

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    Pulls Credit

    Anytime you co-sign a loan, your credit report gets pulled. When your credit report is pulled, this changes your credit score, lowering it anywhere from one to five points. Since you are consenting to be responsible for the loan in the name of the primary borrower, the student loan lender wants to know that you pay your bills and see what your credit history is too. When you credit is pulled, the effect of co-signing student loan on FICO score is it lowers it a point or two. In addition to dinging your credit score a bit, when your credit is pulled, it also shows which company pulled your credit. This information becomes available for future creditors to see as well.

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    Increases Debt

    When you co-sign for a student loan, the loan shows on your credit report as part of credit history. The amount of outstanding debt you have also has an effect on your credit score. The higher amount of debt you carry, the lower it pulls your credit score.

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    Score Increase

    On a good note, the payments on the student loan can help to increase your score or decrease your score. If and when the student loan payments are made on time, then this contributes to increasing your credit score and keeping it high. On the other hand, if the student loan payments do not get made or do not get made on time, this can have an adverse effect on your credit score and drag it down. Since student loans tend to be a federal debt, these loans weigh higher than other debts such as credit cards and auto loans, so it is even more important that these payments are made on time in order to keep your credit score in a positive light.

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    The bottom line is that when you co-sign for a student loan, the effect of co-signing student loan on FICO score occurs. Whether it is a positive or negative effect depends on the circumstances. In essence, co-signing is the same as taking the debt on for yourself, so just as it depletes your score when your credit is pulled and you increase the amount of your outstanding debt, the same happens when you co-sign for a loan.

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    Resources

    Sources:

    USAA (staff members)

    1. 9 Reasons Why You Shouldn't Co-sign https://www.usaa.com/inet/pages/advice_cosigning_pitfalls?SearchRanking=25&SearchLinkPhrase=FICO
    2. 6 Big Hits to Your Credit Score https://www.usaa.com/inet/pages/advice_credit_score_hits?SearchRanking=17&SearchLinkPhrase=FICO

    Image Credit:

    Students via morguefile.com/Clarita