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Are you currently cosigning a loan?  Are you thinking about ending that relationship?  In my book, 7 Steps to a 720 Credit Score: Strategies for Excellent Credit, I give the following advice on co-signing:

Avoid being a cosigner unless you are willing to assume financial responsibility if the borrower cannot make the payments. In fact, when you cosign on an account, you become just as much of a borrower as the actual borrower. When you cosign on someone else’s loan or credit card, your credit will be affected by all future activity on that account. If the person repays his loans on time, your credit will be affected positively. If the person is delinquent, your credit will be injured.

If you are already a cosigner, you should take the following steps to protect your credit:

•   Insist that bills be sent to your address, or track the account online. This way, you can determine whether the borrower is paying on time. If not, you will need to make the payments on the borrower’s behalf to protect your credit. To do so, make sure you pay a bill before it is 30 days past the due date. And, remove your name from the account (or insist that it be closed) the minute it becomes delinquent.

•   More effectively, decide to pay the bill directly and have the borrower pay you directly. This way, you will always be in control of payment.

•   Contact the creditor and see if the loan can be refinanced in the original borrower’s name after a year of timely payments.

The truth of the matter is that sometimes a loved one needs a cosigner, and refinancing in the borrower’s name only just isn’t possible. If this is the case, try finding a replacement cosigner. Let your friend or family know that because the economy has changed, you need to make adjustments to your credit profile, but instead of begging out of the loan, you will help find a replacement cosigner. Perhaps a grandmother or grandfather who does not plan on making any major purchases in his or her retirement years would be willing to cosign. For them, cosigning a loan would not be as detrimental as it would be for you.  In this way, you can protect your relationship and your loved one.

If you have any cosigning horror stories, share your stories below.