Co-signing a student loan can hurt your credit score

Many parents who co-sign a private student loan for a child don’t realize that it can affect their own credit score if they later apply for a mortgage.

Having parents co-sign loans has become more popular lately, because it can make it easier to get a loan approved or to get a lower interest rate. Some 94% of private student loans were co-signed in the last academic year, up from only 77% six years ago.

But if you co-sign a loan, credit agencies will typically consider the amount of the loan as your own debt obligation when calculating your credit score – since you could in theory end up legally on the hook for it. As a result, your credit score may go down, making it harder to get a good rate on a mortgage.

Before applying for a home loan, you could try to get your name taken off the student loan. But this is easier said than done. More than 90% of the time, an application to have a co-signer’s name taken off a private student loan is rejected, according to a recent report by the U.S. Consumer Financial Protection Bureau.

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