“Cosign” means to accept the responsibility for a loan or free credit report online no credit card to repay if the one who is taking out the loan or credit card defaults on the loan. There are times when a friend or family member will ask for permission to have you cosign with them to get a loan for a car or house or any other item that they don’t qualify for unless you also sign on the loan. It is important to know that you will be responsible for the loan if your friend or family member fails to make the payments or stops paying all together. It would be important to let the loan company know where you are so they can let you know when the friend or family member has defaulted on the loan. You also need to know that if the loan is defaulted on, your credit has already been hurt by lates, multiple lates, and or even a collection on the account. Be sure the friend or family member agrees to let you know if they are struggling to make the payments… at the very beginning of the problem, not the end.

New loans are a great way to establish credit when they are used correctly. However, when a new loan has a late on it, you will have several different problems associated with it. First of all, what are you doing with a new loan and then having a late?  Don’t, it costs you a ton of points.  Here’s why… It’s new (1), it has no history (2), it has a balance (3), it has a late (4), and you had an inquiry to get the new loan (5).

The solution is to not have a new loan with a late attached to it. It shows that you can’t control your finances and so it will hit you harder than if you had a late on an old established account.  It’s just good practice to always pay your bills on time as suggested in Secret # 1.  But now that you have a late on that new account, it’s best to delete the account or get the late repaired.  Refer to the Credit Repair Tip section to see what needs to be done to get negative items removed from your credit report.

New loans always cost you points because they start with an inquiry, don’t have credit history repair services and are usually 100% debt to credit ratio. Be cautious in getting a new loan as it does hit your credit score in 7 different ways as we mentioned in previous secrets.  Know what you need the credit for and don’t just get any credit you can as it will hurt your credit scores. It’s a puzzle that needs a plan and requires careful consideration before plunging ahead. What will it be used for, when will you get it paid off, what will it cost you to get, what is the interest rate and will it help to improve your lifestyle or will it put you deeper in debt?

I have noticed that people are not patient anymore and it costs them in money, in time, in heartache, and in stress and strain on relationships.  Plan ahead, be patient, save, invest, gain knowledge from those who are successful and then be patient again.  My father always taught me, “When in doubt, don’t.”  In other words, wait and see so you aren’t jumping on board a boat that has already left the dock.  You get wet and it upsets the fish.

A rule of thumb to getting new credit is this… get a National Bank Credit Card, get a high credit limit, and keep it for the rest of your life, with a low balance, paid on time, every month… this will create an excellent credit score for years and years to come.

Now go be curageous…

The one thing we can caution you about a loan application is to be honest. Don’t go increasing your income or hiding your expenses. It will just get you in trouble and trouble impacts your business credit scores in a big way. Trouble comes in many forms – you get sick, don’t make the hours you expect to be paid for at work and then don’t have the money to pay the bills, they get paid late and then you have lates on your credit report. Lates cost you lots of points. A mortgage company could audit your loan and find out you really don’t make that much or you have more debt than you said you did and could call the note due and payable immediately. Then you have to find another loan or lose the house. Especially in these troubling credit crunch days, being totally honest with your lender will keep you out of trouble more than not. Don’t get over your head with debt, start a savings plan, prepare for emergency situations, don’t get greedy or try to buy more than you can afford,  be cautious and you will have less trouble dealing with challenges when they do come…   And they will.

Let me share an experience.  Just recently I went in to get a loan for a new home I wanted to purchase.  I went to a lender that I know and trust and asked about the rates, the conditions and what it would take to get a loan for me.  He assured me that there was no problem, since I had enough collateral to actually pay for the home outright.  OK, so I say to go ahead, now, I did go to two other loan companies prior to settling with my friend because I thought I could get a better deal.  Well, I was turned down by both other companies because I had an unusual situation they had to deal with and they said they couldn’t go outside “the box”.  Meaning that unless it was a “check the boxes” loan, they couldn’t help me.  Hey, I have 803 credit score and it didn’t make any difference to them. Well, I started the loan process with my friend and as the loan application was filled out it was obvious that I was beginning to stress my friend.  It is going on 3 weeks now and the loan is still to get started as I have had to jump through hoops and put my down payment at risk before the bank will even begin to get started on the loan.  And this is why, my friends, that you do your homework before you get started.  Yes, you have to have excellent credit (740 or above) and make sure you have worked in the same job for 2 years, have the down payment seasoned (3 months in the same account, not touched) and don’t open or close accounts and don’t pay off any collections within a year. The moral is, the banks are being extra cautious and if your loan officer thinks it’s a slam dunk, be prepared to wait and do what is asked of you quickly.

In fact, council with an expert credit counselor if you are going to plan on purchasing in the next year or so… they will teach you what you need to do to get prepared.  But be cautious, read my blog, read the related blogs in the archive and then ask questions.  I would be delighted to answer them.