Does Cosigning an Apartment Lease Affect My Credit?

You take a financial risk when you cosign an apartment lease. You put your money and your creditworthiness on the line by linking yourself to a debt that someone else is responsible for paying. The impact on your credit rating depends on how the renter handles his end of the agreement.

Credit Reporting

Cosigning an apartment lease generally won't affect your credit rating, unless the tenant you cosigned for fails to pay the rent. Landlords often don't report their tenants' monthly payments to credit bureaus until there's a problem with collecting the rent. One exception to that practice began in 2011 when the Experian credit-reporting company began including rental data in consumer credit files on a limited basis. The company gets rental payment histories from property managers for about eight million renters, according to the "Los Angeles Times." Nonetheless, many rental histories remain unreported because the Times notes that Census Bureau data show the United States has nearly 38 million rental units.

Collection Actions

Landlords collect past-due rent through collection agencies or by suing their tenants. Such actions usually appear on the co-signer's and renter's credit reports and damage their credit ratings. You obligate yourself to pay rent for someone else when you cosign an apartment lease. That gives the landlord the right to collect unpaid rent from you if the renter won't pay. Some co-signers end up paying a tenant's past-due rent just to avoid having their credit ratings damaged.

Creditworthiness

You hamper your ability to borrow money or qualify for credit cards if you cosign an apartment lease that ends up in collections. Having a collection account on your credit report not only lowers your credit score, but it also makes loans and credit cards more expensive. Lenders and creditors will attach higher interest rates to loans and credit accounts you qualify for due to the damage to your credit rating.

Considerations

You could become the main target for a collection agency trying to recoup payments for an apartment lease you cosigned. Landlords require co-signers for renters who don't have good credit histories or stable employment. Landlords accept the credit histories and incomes of certain co-signers as a guarantee for lease payments because the co-signers have the finances to pay off the lease. Similarly, collectors pursue payments from people who are more likely to be able to pay off a debt and that's usually the co-signer.