How a Cosigner’s Credit Score can Affect your Home Loan

When buying a home with a co-borrower, it is essential to know how both of your credit scores can affect your loan. We are going to address issues such as how much the credit score of each borrower affects the loan? Does having a cosigner change how much we can borrow? What about the interest rate? There are numerous areas of confusion around these topics and many others on the subject of home loans with more than one borrower.

Know your Fico Scores?

Getting to know your FICO scores is an essential first step to understanding your credit standing. FICO is short of Fair Isaac Corporation. The FICO score is one of the most common credit scoring systems used in consumer credit checks today. The score ranges between 300 up to 850. This number helps you determine your creditworthiness and uses a few factors to determine your score. These factors include your current amount of debt, your history of payments to debtors, the length of your debts and payment history, and the types of credit accounts you have opened.

Additional Credit Scores?

A FICO score is not the only score to know though; For more significant transactions such as car loans or mortgages, you will also need to know your credit score from the three primary credit reporting agencies;  TransUnion, Experian, and Equifax.  These reports are available for free once every year for everyone. Simple visits each agency’s website and fill out a free credit score application to receive it.  You will need a score of 620 or higher to qualify for a traditional mortgage and a score of 580 to be eligible for an FHA loan.


The only real advantage to using a cosigner or a co-borrower on a mortgage loan is to increase the amount of money you will qualify for in your loan.  Including two incomes in a loan application allows the borrowers to borrow more money for a more substantial mortgage.

What about a Bad Credit Score?

The downside to applying for a loan with another person as a cosigner is the issue of using two different credit scores to determine interest rates.   If one of the borrowers has a poor credit score, it can negatively affect the interest rate on your loan costing you more money in the long run.  Typically a lender will use the lowest credit score of the two borrowers to determine interest rates.

So if you are in the market for a new home and are looking through all of your options to buy a house, then take a look out our list of rent-to-own homes.  These homes will let you move in and live in your home before you buy it.