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How does co-signing will affect my credit after this issue ?

I co-signed for a car lease for my "friend". I believe he paid for the last 36 month. He returned the car at the end of the lease with damages and he went over the mileage. Honda is asking him for $2000 and he is disputing the charges. He wants to sue them. Honda just called me and they are asking me for the amount. They said it was past due and that my credit is already affected by the issue. If I don't pay within 20 days , it will get worse. Is that true ? I have an excellent credit. I do worry.

Sep 23, 2012 by L from Astoria, NY in  |  Flag
1 Answer  |  2 Followers
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7 votes

You need to be concerned about this and do everything you can to stop it from bleeding through to your credit report. But I think Honda is trying to scare you by claiming it is already has, and you can confirm that by accessing your Government-mandated free credit report at https://www.annualcreditreport.com.

Since you co-signed the loan, you are on the hook if your friend doesn't pay up/solve the lease overages. Start by letting your friend know this is putting you in a really difficult position. Then make Honda aware of the back story, and especially that their may be a pending lawsuit. Ask them to first solve that discrepancy before coming back to you for payment. Finally, recognize that you may actually have to pay up. That's the whole idea of co-signing a loan...your friend didn't have the credit score to afford the car, but with yours as a guarantee, that made the lease possible.

3 Comments   |  Flag   |  Sep 24, 2012 from Berwyn, PA

thank you for response. I checked my credit report, it doesn't show anything bad on it. To pay is one thing, to ruin my credit is another. I will follow your advise. Helping a friend is not always the best idea.... never again... Thanks again

Flag |  Sep 24, 2012 near Astoria, NY
Erik Evans, CFP®

It's a shame Honda tried to scare you like that, and clearly information is power. But this isn't over yet. Keep open channels of communication with all counterparties and encourage your friend to "do the right thing." Also, you only get one free credit report per 12 months, so next time it will cost you to check if Honda is telling you the truth. This website gives you more information about how the Government's free credit report program works: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm

Flag |  Sep 24, 2012 near Berwyn, PA

yes it is bad. I gave my friend 2 days to resolve the problem. I can't wait any longer. He agreed to pay in 2 days if nothing can be done. Thank you for your help.

Flag |  Sep 25, 2012 near Astoria, NY

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