Some landlords will not rent their property to tenants who have poor credit or lack a significant credit history. While you might be financially prepared to meet your obligation, your landlord can simply choose another person who meets minimum income requirements or has a sound credit track record. One way around this problem is to find somebody willing to cosign your apartment lease. If you exercise this option, however, proceed with caution.
Protection Against Tenant Default
An apartment lease sets a specified term -- often six months or one year, according to the California Department of Consumer Affairs -- and the conditions governing the landlord-tenant relationship. Although the lease is a legal pact, you can still refuse to pay, which is a default. If your landlord is concerned about the prospects of default at the outset, she might require a cosigner before signing a lease with you. From the landlord's perspective, a cosigner guarantees that you will pay the rent and observe your obligations in the lease. If you do not, the landlord can sue both you and the cosigner.
Who Should Act as Cosigner
As the cosigner pays the debt when the tenant can not, he is usually a family member or close personal friend. Ideally, the cosigner should be in close contact with the tenant so he can verify that the rent is paid on time. Professional cosigning services are available at a cost. When somebody cosigns an apartment lease, he literally places his signature on the agreement, likely right below yours.
Cosigner at Risk
The cosigner assumes responsibility for the lease if the tenant fails to meet his obligation. As Maxine Sweet of the Experian Credit Bureau warns, both parties need to take a cosigning scenario seriously. If you default on your lease, your cosigner is responsible for your debt. The landlord can ask the cosigner to pay the delinquent rent. If you violate the lease, the landlord can go after the cosigner for damages. For example, if you move out, even with rent paid on time, but you trashed your apartment, your cosigner could be on the hook for repair costs.
Credit Reporting Consequences
If you fail to pay rent under the terms of your lease, most landlords will not report you to a credit-reporting agency as the process is cost-prohibitive. However, landlords often send a collection agency after you or seek a judgment in the civil courts. If either situation arises, the cosigner's name will likely appear on the collection account or judgment. Both negatives will probably turn up on the cosigner's credit report.
Help each Other Out
As long as the tenant pays the rent on time, no one's credit is affected. So, if you are about to fall behind on your rent, contact your cosigner and ask for help. If your cosigner can help you pay the rent on time, you avoid a battle with your landlord and possible eviction. If you act as a cosigner for somebody else, keep an eye on his finances. Again, if you can bail the tenant out before collection activity or a lawsuit ensues, it will save both of you time, trouble and a hit to your credit score in the long run.
- California Department of Consumer Affairs: Tenants Guide
- Experian: Broken Apartment Lease Contract Can Affect Your Credit Report
- Experian: Potential Consequences of Cosigning an Apartment Lease
- Consumer Financial Protection Bureau. "What Is a Co-Signer?" Accessed Dec. 18, 2019.
- Santander Bank. "Personal Loans From Santander Bank." Accessed Dec. 18, 2019.
- Wells Fargo. "Personal Loans." Accessed Dec. 18, 2019.
- Consumer Financial Protection Bureau. "What Are Common Credit Report Errors That I Should Look for on My Credit Report?" Accessed Dec. 18, 2019.
- Consumer Financial Protection Bureau. "How Do I Get and Keep a Good Credit Score?" Accessed Dec. 18, 2019.
- New York State Higher Education Services Corporation. "NYHELPs Cosigner Liability and Release." Accessed Dec. 18, 2019.
As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.