Despite the fact that the average FICO score is hitting the record high of 703, many people still struggle with poor credit. Having poor credit costs you money.
If your credit score is less than good, you’ll find it harder to secure a loan. When a lender does approve you, the details of the loan won’t be as desirable as they could be. So how do you fix this?
You could work towards improving your credit score, but that takes time. Instead, start the process of finding a co-signer. This guide will help you find the right person.
- Start Close to You
Most people start by asking individuals close to them if they’ll be a cosigner. This would include a spouse, parent, grandparent, or sibling. These are the people who you know the best and who know you.
You shouldn’t just ask anyone close to you, though. You want to ask someone with a high credit score and a strong history of paying back loans. You’ll then leverage these strengths to secure better loan terms.
- Extend Your Network
Sometimes the immediate family we listed aren’t able or willing to be your co-signer. Perhaps they refuse, or their own credit isn’t good. This is when you’ll need to expand your network to ask people you still know but further out.
This could include friends, extended family members, your parent’s friends, or even a trusted mentor. It can help to look for someone you trust, look up to, and has demonstrated a strong financial history.
The person you ask will be financially liable if you fail to pay the debt. So stick with people you have a close enough relationship with that are willing to take on that risk for you.
- Consider a Professional Service
If you can’t find someone that you know personally who will agree to be your co-signer, all is not lost. There are professional services out there who will help you find a co-signer. A word of caution, though.
These services typically charge hefty fees and may not be a financially smart choice. There are also many fraud companies masquerading as a co-signer locating service. Thoroughly research any company you decide to work with before you agree to or sign anything.
- Asking Someone to Be Your Co-Signer
Treat the person you’re asking to co-sign with respect. Come prepared with all of the loan details. The co-signer will want to understand the debt they’re taking on through you and why.
Be honest about your credit score, current financial situation, and the ability to pay the loan back. Expect to discuss the future risks of agreeing to the loan.
Have Success Finding a Co-Signer
Finding a co-signer can seem like a daunting task, but it’s well worth the effort when qualifying for loans. Be honest about your current financial situation and credit score when asking. This will install trust and encourage the other person to agree.
If you can’t find a co-signer, then focus on improving your credit score. Then you can apply for a loan again.
Browse our other articles for more tips and advice on managing your money.