Private Student Loan Cosigners for Applicants with Bad Credit

Using a cosigner is essentially borrowing another person's good credit score to improve an application. Using a cosigner is necessary when a borrower has bad credit or a short credit history.

Use a Cosigner with a Better Credit Score

Borrowers should use cosigners with excellent credit histories to help make their application more attractive to a lender. A lender wants a stable cosigner with good credit. The number one factor in determining risk is the FICO credit score. Since college tuition loans are very large on average, a borrower will need credit far above the average rating to get a better interest rate.

Use a Cosigner to Lengthen Credit History

Many students have credit scores that are within the acceptable range but suffer because their credit history is too short. Lenders prefer an established credit history, usually dating back two to four years. Even if a borrower does not have negative marks on their credit report, not having good credit can hurt the overall attractiveness of the application. Using an older cosigner with a longer credit history, can help a borrower overcome this time constraint instituted by many lenders. 

Use a Cosigner with a High Salary

Another way that lenders verify ability is by using income. Students seeking loans typically have a low, or no salary. In slow job markets, lenders are cautious when extending student loans. Using a cosigner with a salary high can help guarantee payment on the loans. The lender will be assured that the borrower is not a risk of default. Even if the borrower does not make enough money to pay off the loan, the cosigner should be able to cover the charges. 

Slowly Repair Credit through Cosigned Loan

When you use a cosigner for a loan, your credit score will slowly increase. Using a cosigner for your first major loan, or first few loans, is a great way to establish confidence with lenders. Once you have paid off several loans with a cosigner, such as student loans, auto loans or personal loans, your credit score should increase. Be sure to build up your own, independent credit as early as possible in order to provide for your future financial health and stability.

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