Responsibilities If Cosigning a Lease
- Cosigners attach their names to leases and loans and become a joint applicant. With rentals, some landlords require a cosigner on the rental agreement because the person applying for the rental may have no credit history or an unreliable credit history. Without the assistance of a cosigner, some individuals are unable to secure a rental. Landlords typically feel more comfortable with a cosigner on the agreement because cosigners are second in line to make lease payments.
- Cosigners don't only help applicants qualify for a rental. The role of cosigning is much deeper than this; and by cosigning, you essentially agree to make the lease payment if the tenant cannot. Although you may not live in the property with the cosigner, putting your name on the rental application indicates you are a joint applicant and equally responsible for the monthly debt payment until the conclusion of the lease term. In other words, if the primary tenant walks away from the lease or decides he can no longer afford the payment, it's your duty to fulfill the lease agreement.
- Cosigners can choose not to pay a rental debt if the primary tenant breaks the lease. However, this can trigger a legal battle among the landlord, the primary tenant and the cosigner. The landlord will sue the primary tenant, but he may also include the cosigner in the lawsuit. Going to court over a broken rental agreement and losing can stir up other problems for cosigners. The judge will likely order the tenant and cosigner to pay off the lease balance and attach a judgment to their credit reports.
- Resistance to fulfill the responsibility of cosigning a lease can damage credit scores. As soon as the judgment appears on a cosigner's credit report, his credit score will decrease. Judgments remain on credit profiles for seven years, and paying past due rent payments in full will not delete a judgment. A better option is to avoid a lawsuit altogether and negotiate an installment plan with the landlord to satisfy the debt if the primary tenant breaks the lease. Better yet, cosigners should only agree to cosigning if they have the disposable income to afford the rent payment, in addition to their personal obligations.