I'm about to buy a car and am planning on using my mother as a co-signer. My scores are on their way up, but still not good enough for the prime rates (I also don't have a ton of money to put down). My mother has good scores (720+) but has just refinanced their mortgage in her name. She's also a little concerned that if she cosigns for me now then she might have a problem getting a car for herself later this year. I would think that with her scores and perfect credit history that she'd be okay, but just wanted to make sure (I would hate to screw her over). Any thoughts?
By cosigning, she raises her balance-to-CL ratio. She also puts herself on the hook for whatever the amount of the car is. That being said, when a car dealer pulls her credit when she buys a car, the additional financial obligation of your car may / may not make the bank nervous. I guess it depends on what her existing credit looks like - not just her scores.
Her credit report is spotless - no late payments and a long history. If she did cosign for me, would my salary and debt to income ratio be any factor, or would they only look at hers since she has the higher score? Although my credit reports suck, my current debt to income ratio is close to zero.
Her income to debt ratio would not be affected by your income at all. In the event you default, she is responsible for the full payment. Unless she counts your income as her household as well, it would not benefit her. Also, her income to debt ratio must support the car payment, or the loan companies won't take her as a cosigner.
I've been told that a co-signer does not mean you get a lower interest rate. Is that true? I have a 14% rate due to bad credit. I didn't attempt to use a co-signer because I thought it wouldn't make a difference. I was told that co-signers only help get approval but not lower rates. Someone please tell me if I am right or wrong.
skky, You make sure you have money to pay back the loan. Ohterwise you're going to ruin your mother's credit or she had to pay your car loan. Ron.
