The Risks of Co-Signing Loans for Your FICO Score

30 January 2026

Alright, so your cousin Jimmy or BFF Sarah just asked you to co-sign a loan. Seems harmless, right? They’re family. Friends. Practically saints compared to your ex who borrowed your lawnmower and vanished. But hold your financial horses for a sec—before you sign that dotted line, you might want to know what you’re really getting into.

Co-signing a loan may sound like a generous, helpful thing to do—and hey, sometimes it is—but it can also blow up your FICO score faster than a microwave burrito on high power. Let’s break it down and talk about The Risks of Co-Signing Loans for Your FICO Score—because that seemingly kind gesture could cost you more than just a few awkward family dinners.

What Does Co-Signing Even Mean?

Before we dive into doom and gloom, let’s clarify what co-signing actually is. Imagine someone (usually a friend, family member, or someone you've dated who now wants to talk “seriously”) wants to take out a loan. Maybe it’s for a car, apartment, or to start that artisanal avocado toast food truck. But here’s the issue—they don’t qualify on their own. The bank looks at their credit report and goes, “eh, pass.”

Here’s where you enter the scene wearing your superhero cape.

When you co-sign, you’re essentially telling the lender, “Hey, if this person flakes out, I’ll pay. Pinky promise.” You’re not just a reference. You're signing a legally binding agreement that you’ll pay the full loan if the other person can’t… or won’t.

Your FICO Score: What’s at Stake?

Now, your FICO score is basically your financial street cred. It determines how worthy lenders (and sometimes landlords, insurance companies, and even employers) think you are. It’s based on a few things: your payment history, credit utilization, length of credit history, new credit, and mix of credit types.

When you co-sign a loan, you’re adding a brand-new obligation to your report. That means your score could be sitting on a financial seesaw that the other person controls. 😬

So, Exactly How Can Co-Signing Mess Up Your Credit?

1. ✅ The Loan Shows Up on YOUR Credit Report

Surprise! Even though it’s “their” loan, lenders report it to credit bureaus as if it’s also your responsibility—because it is. That loan doesn’t come with an asterisk that says “but he's just a co-signer, don’t worry.”

Let’s say it’s a five-year car loan for $25,000. That whopping chunk of debt is now on your report. So when you go to apply for a mortgage or a fancy rewards credit card, lenders might see that and go, “Hmm… are you sure you can handle more debt?”

2. 🔥 One Missed Payment? Your Score Goes Up in Smoke

This is the big one right here. If your cousin Jimmy forgets to make a payment because his phone bill came out early—guess what? That late payment hits both of your credit reports. And payment history makes up a whopping 35% of your FICO score.

Even one late payment can drop your score by 50 to 100 points. That’s like going from VIP status to sitting at the kiddie table.

3. 🧲 Your DTI Ratio (Debt-to-Income) Takes a Hit

Lenders don’t just look at your score—they also look at how much money you owe compared to what you earn. That’s your debt-to-income ratio.

So if you co-sign a $1,200 monthly payment and your income is, say, $4,000 a month, you suddenly have a 30% DTI just from that loan. Add your own bills and BOOM—you’re looking like a credit risk when you’re just trying to be nice.

4. 📉 Your Available Credit Could Shrink

If the new loan pushes your total available credit higher, you might think, “Nice! I’ve got more room to play with.” Nope, not always.

Because it’s additional debt, your credit utilization can go up. And lenders might even lower your credit limits elsewhere because they see you as carrying more financial risk. So the very act of “helping” can actually make you look risky.

5. 👀 You Might Not Even Know There Are Problems

Here’s a scary little tidbit: Lenders aren’t required to notify co-signers if payments are late. That’s right, you could be cruising along, sipping lattes and living life, while the primary borrower tanks your credit in the background.

Unless you're actively checking the account—and really, who wants to babysit someone else’s loan?—you might not even know there's an issue until your score crashes.

The Emotional Toll: Drama, Regret, and Awkward Holidays

Let’s be honest—money and relationships rarely mix well. Saying “no” to loan co-signing can feel heartless. But saying “yes” can light the fuse on a stress bomb that blows up Thanksgiving dinner faster than Aunt Karen’s political tirades.

What happens if they stop making payments? Sure, you might take over to protect your credit—but then what? Do you chase them down for repayment? Take them to small claims court? Ghost them until the heat death of the universe?

Co-signing not only risks your finances, it risks your peace of mind and personal relationships. Think twice before you mix friendship with financing.

Real Talk: When Might Co-Signing Be Okay?

Okay, not everything is doom and gloom. Co-signing can be a good move in certain cases. Like:

- Your kid is trying to get their first car loan.
- You fully trust the person and have access to the loan info.
- You can afford to take over payments if things go south.
- There’s a clear agreement in writing (and maybe even a lawyer involved).

But let's be real, those scenarios are the exception, not the rule. And even then, go into it with open eyes, not rose-colored glasses.

What to Do If You’ve Already Co-Signed (Oops…)

If you’re reading this a little too late and you’ve already co-signed a loan, you’re not totally doomed. Here’s what you can do to protect yourself:

🧾 1. Monitor the Loan Like a Hawk

Set up online access, email notifications, perhaps even a pigeon with a scroll. Whatever it takes to stay informed.

🛠️ 2. Refinance or Remove Yourself—If Possible

Some lenders allow the primary borrower to refinance the loan after a set period. If their credit improves, they might be able to fly solo and release you from the obligation.

💡 3. Set Reminders or Auto Pay

If the other person is cool with it, help them set up automatic payments or at least reminders. Less chance for things to slip through the cracks.

🤝 4. Communicate, Communicate, Communicate

Regular check-ins can prevent surprises. If they’re struggling and you find out early, you can problem-solve before it dings your credit report.

Hot Tips Before You Even Think About It

If you're considering co-signing, ask yourself:

- Can I afford to pay this loan if they ghost me?
- Do I know their financial history well?
- Am I okay with this loan showing on my credit report?
- Is this a short-term loan or a decade-long commitment?
- Would I lend them this money directly instead?

If the answer to any of these is “Um… no,” then maybe just bake them some cookies instead.

Final Thoughts: Think With Your Brain, Not Your Guilt

Here’s the deal—co-signing isn’t bad per se, but it’s definitely a high-stakes move. You're tethering your financial future to someone else’s ability to adult. If they mess up, you pay the price. Literally.

So before you go co-signing anything, stop and think it over. Look not just at the numbers, but at the relationship and your long-term goals. Because while helping someone is noble, protecting your own financial future? That’s just smart.