A co-signer is someone who takes full responsibility for paying a lease or loan along with the primary signer. Co-signers can sign on to any loan or lease, including rental units, provided a signed lease agreement is in place.
When a Landlord Might Require a Co-Signer
A landlord may mandate a co-signer if a prospective renter has a low credit score, insufficient income, or an undesirable 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. If they can’t meet any of these requirements, the landlord may require a co-signer.
Co-signers, who sign the lease agreement just like the primary renter, act as a safety net for the tenant and ensure the landlord that monthly rent payments will come in on time.
Co-Signer vs. Guarantor
In real estate, a co-signer takes on full responsibility for paying the lease, while a guarantor only agrees to pay in the event that the tenant defaults on their rental obligations.
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 tenants. Guarantors are not allowed to live in the rental unit.
Should you screen co-signers?
Experienced landlords know that great tenants start with thorough 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, regardless of their capacity.
Benefits of a Co-Signer
One of the main benefits of a co-signer is that a renter gains a roommate and can 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.
Drawbacks 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 essential to clearly define how space sharing within the rental unit will work and outline what will happen if anyone on the lease is unable to 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, that check will show up as a soft inquiry on the applicant’s credit report. Soft credit checks don’t permanently impact your credit score.
By collecting rent payments through TurboTenant, landlords have the option of reporting on-time rent payments to credit bureaus. As we only report on-time payments, rental payments usually cannot hurt a tenant’s credit score and can only build it up.
That said, if someone co-signs a rental lease and the primary signer defaults, doing so could negatively impact the co-signer’s credit.
