What is a Co-Signer?
An Essential Property Management Term
A co-signer is someone who takes full responsibility for the payment of a lease or loan along with the primary signer. Co-signers can sign on to any loan or lease, including rental units with a signed lease agreement.
When To Have a Co-Signer
A landlord may require a co-signer if a prospective renter has a low credit score, insufficient income, or a short rental history. The property owner may also have other requirements as part of the rental lease agreement that the tenant must satisfy before moving in, and if any of those requirements are not met then they may require a co-signer.
Co-signers are intended as a safety net for the tenant and to ensure the landlord that monthly rent payments will come in on time. Co-signers sign the lease agreement just like the primary renter.
Co-Signer vs. Guarantor
In real estate, a co-signer takes on the full responsibility to pay the lease, while a guarantor only agrees to pay in the event that the tenant defaults on their rental obligation.
Another primary difference between co-signers and guarantors is that co-signers have more rights under the lease, and are entitled to live in the rental as a tenant. Guarantors are not allowed to live in the rental unit.
Should You Screen Co-Signers?
Experienced landlords know that great tenants start with great screening reports, and co-signers are no exception. You should screen every prospective tenant before signing a lease agreement with them, and you should similarly screen anyone who may sign a rental agreement as a co-signer or guarantor. It always pays to know the full criminal history, credit history, and background of anyone signing a lease for your rental property in any capacity.
Benefits of a Co-Signer
One of the main benefits of a co-signer is that a renter gains a roommate and is able to split the monthly rent with them. If a tenant has poor credit or low income, a co-signer is a great option to alleviate the stress of monthly rent payments and to give the landlord confidence in that tenant.
Risks of a Co-Signer
If the primary tenant falls behind on their rent payments or is unable to pay, the co-signer must take on the financial responsibility. If the co-signer also cannot cover the rent payments, then both parties may face eviction proceedings.
Should You Allow Co-Signers?
If a tenant cannot be solely responsible for paying the monthly rent, or doesn’t have the credit or rental history to prove that they can, then a co-signer can be a great option. As the landlord, it’s important to clearly define how the sharing of space within the rental unit will work, and to outline what will happen if anyone on the lease cannot cover their financial obligations.
For any rental unit, you should always choose to move in the most qualified applicant. If you’re choosing between a renter with a co-signer and a renter without a co-signer, you may lean toward the renter without a co-signer. As long as you’re making that decision based on consistent screening criteria and you remain compliant with fair housing laws, you’re able to choose any tenant you would like to rent to.
Does a Co-Signer Affect Your Credit Score?
When a property owner runs a credit check on a renter or co-signer, as they always should, then that check may show as either a hard or soft inquiry on their credit report. Hard credit inquiries can lower a credit score by a few points for up to 12 months.
Beyond that credit check, co-signing does not typically affect a person’s credit. Rental payments made through TurboTenant have the option of being reported to credit bureaus, but we only report on-time payments, which means that rental payments normally cannot hurt your credit score and will only build it up.
That said, if someone co-signs a rental lease and the primary signer defaults, the co-signer’s credit could be negatively impacted.
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A guarantor is someone who guarantees to pay a tenant’s rent in the event that the tenant defaults on their rental obligation.
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