As the younger set turns into young adults there will come a time when someone applies for credit for the very first time. That’s really the only way to establish a credit history is to apply for and use revolving or installment accounts. Sometimes though the credit applied for is just out of reach of the cosigningborrower’s range.

Certain creditors will have more stringent approval requirements than others. That’s when someone who wants to apply for a loan but can only get an approval with a qualified cosigner. Most often this cosigner is a parent or a relative. If you’re approached to cosign on a credit account, what should you be concerned about if you decide to help?

With regard to mortgage financing, the only loan that allows a cosigner to help qualify is the FHA program. Otherwise the borrowers must still qualify on their own without using any cosigner income. And if the borrower’s credit is poor, your good credit won’t make up for the bad. Say however that your nephew wants to buy and finance a car but is told he needs a cosigner. If you agree to cosign, remember the payment history of the automobile loan will appear on your credit report as though you are the primary borrower.

Even if you don’t make the payments are ever even see any sort of a statement however the nephew pays will reflect on you. If there is ever one payment made more than 30 days past the due date your credit score will be harmed. Or, in the instance of a credit card if the loan balance gets too close to the limit or worse, surpasses it, again, your own scores will drop.

It’s good to be kind but make sure you and the person you’re helping know the implications and you should also make sure you review a copy of your credit report regularly to check to see how your nephew is handling his automobile loan.