Here’s the script for the “Credit Application And Cosigning A Car” video:
Knowing that multiple inquiries only count as one towards your credit score in 30 days while rate shopping for a loan, you hopefully already had an approval from an outside lender before going to a dealership to use as leverage. We’re at the point now with the desk zeroing in on final numbers that they will want to see a credit application if you want to allow them an opportunity to broker your financing.
In fact, even if you’re paying cash, they will still want one with at least your basic information. You won’t need to provide employment or income information, and hopefully, you remembered to lock your credit reports, but they’ll still need your basic information and social security number.
The application process is pretty straightforward. Just fill in the blanks, and they’ll do their magic. If your credit score is around 650 or below, then make sure what you put for the income section matches up with what you can prove you earn through W2s or paystubs. If you’re in doubt, then just leave it blank and send your most recent paystub back to the sales manager with your application. They make those calculations all day long.
Now I think it’s important to discuss cosigning a car.
Sometimes if a prospective borrower is young or has significant credit challenges, the sales manager may ask for another borrower to cosign, thereby improving the quality of the application. What I’ve seen most frequently is a parent cosigning a car for one of their children. What happens in this situation is that both applicants are equally responsible for the debt, and it will be reported on the credit history for both.
I’m going to give anyone consigning a car the strongest possible warning that I can give. Regular financial discussions with people from all walks of life have been a significant part of my livelihood for the last decade. I’ve seen people with outstanding credit tank their credit scores by a hundred points or more through cosigning for someone else. Here’s my sincere advice to anyone who will offer to help a friend or family member by placing your credit on the line to help someone else.
When cosigning a car, make the payment yourself.
The reason your child, as an example, was approved was because of you. You make the payment and then have your child pay you. It is the only way to protect and enhance the years of good history that you’ve earned. If anyone asks you to cosign for a debt, and you are unwilling to pay that debt yourself, then don’t do it. It will bite you. I’ve had this discussion hundreds of times….obviously never while I was in the middle of selling a car because I needed someone to get approved!
At this point, though, my living isn’t tied to the financial decisions you’ll make going forward, so it’s important that you understand the true gravity of ever accepting debt for someone other than yourself. Assume something will go wrong and that the buyer won’t be able to make a timely payment, things even go wrong for the most responsible people.
Life happens after all. People lose jobs unexpectedly or have other emergencies beyond their control, so sometimes payments get missed. As long as you cosign, though, with your strong credit, it will always be protected as long you make the payments yourself.
Another option instead of cosigning a car
If your credit is in a good enough position where you would like to help someone out, but don’t want to accept the responsibility for their loan, we’re here to help. We have another course titled “Discover How To Build Credit Quickly” don’t worry, it’s free just like this one.
The first lesson, “How To Build Credit Quickly At Any Age” reveals the perfect way for you to help without actually cosigning a car for them.