Before agreeing to be a co-signer or co-borrower with ANYONE, including family, friends or acquaintances, be aware that doing do obligates YOU to pay the account on the loan, bill or whatever it might be, if the BORROWER doesn't pay. That's what being a co-borrower or co-signer means. Any number of times in my collection days or interviewing potential mortgage customers when an account came up as past due or as a collection, the co would say, "That's not my bill. I just signed so they could get the money." Now, either a loan officer didn't do a very good job of explaining exactly what it meant to be a co-signer or the customer chose not to understand the ramifications of agreeing to sign a loan with someone else.
Randy, an assistant manager with a grocery store, had co-signed with a route driver for a bottling company, just trying to be "helpful" to someone going through a rough time financially. Imagine the surprise of the collection manager when Randy informed them he had filed Chapter 13 Bankruptcy and any further discussion of the account needed to be done with his attorney. When a debtor says the word BANKRUPTCY, the caller, whether from a collection agency, bank, finance company or whatever, cannot call the debtor again. And they cannot call the co-signer if there is one, to let them know what is going on. The only way a co-signer will know if they apply for credit themselves and the lender asks them about it or tell them they need to get a copy of their credit report to see why they were denied credit. It doesn't sound fair but it's the law and going against it can land a lender, collector or whoever in a lot of trouble.
If for any reason one should agree to be a co-signer or co-borrower on a loan, make a point of calling periodically to check the account payment history. Whatever the payment history, good or bad, on time or late, it will show on the credit report for both co-borrower and borrower.
In business, if partners sign a payment agreement of any kind and only one person in the partnership pays their part, the other partner will be held responsible for the remaining part of the bill. A mortgage loan was held up because of legal action was taken against two partners even though one partner had paid "his part" of the account. In order to close his mortgage loan, the "good" partner had to pay the rest of the bill plus court costs, interest and filing fees.
On other types of contracts, even if everyone agrees to split the costs, if one party doesn't pay their share, it will fall to the others to pay even if they have already paid their part. One family found themselves in court over the funeral expenses of their late Mother when one of the siblings decided not to pay their part. All were sued over the remaining balance.
Ex-girlfriends, ex-boyfriends and ex-spouses have found themselves in credit trouble because they trusted the other person to do the right thing and pay the bill. Because they never followed up, their credit scores have been wrecked due to late payments or nonpayment of loans, credit card balances and/or mortgages. Never take anything for granted. Call, follow up until the account(s) are paid off and closed. Your credit depends on it.
Barbara Tubbs Hill has been in the credit and mortgage business for over twenty years. The people in this article are real. Some are family members and others have been customers. For more information and the Credit Tip of the Week, go to [http://www.askbarb313.com]
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