A cosigner can make or break an apartment deal for some potential residents. The perfect resident match quickly sours when the appropriate criteria have not been met. The property manager sometimes receives the bad end of the bargain in these situations.
Cosigners appear on the leasing agreement drawn up by the apartment manager, but they are not required to actually live in the apartment. The cosigner is considered a backup. Essentially, they agree to pay rent for the apartment if the residents ever fall through on their agreement to do so. Apartment managers often have trouble finding the fine line between when a cosigner is necessary and when one is not. Below is a quick guide to when residents need a cosigner.
You may want to ask a potential resident to add a cosigner to the lease if they do not have any (or minimal) credit history. If a potential resident does not have any sort of credit history, it is difficult to vouch for their ability to pay bills on time. Credit scores are most often standardized by country, so even if the resident has moved from coast-to-coast, their credit score has followed them. Young residents often run into the issue of never owning a credit card or made payments on loans. In this type of a circumstance, a potential resident may have next to nothing to back up their credit history and will need a cosigner to do so instead.
A cosigner, usually an older relative or close friend, makes up for this lack of backup by providing the backup themselves. Cosigners do not usually want to vouch for people who they believe to be dishonest. In this way, the cosigner’s signature acts as a recommendation for the potential resident as well. By signing, the cosigner states that they believe the resident will pay rent on time, and that they are willing to suffer the consequences if they are incorrect. This way, the headache of a resident unable to pay rent down the road does not fall on you.
In checking for resident-apartment compatibility, apartment managers often call previous landlords to better understand what type of resident the person is. This call helps establish payment history by determining if the potential resident consistently paid rent on time. It also gives you a glimpse into the way the care for rented property. Did they leave the apartment in spotless condition, or did they scratch the floors and put holes in the walls? If any of this information is missing or comes back negative, it will impact the need for a cosigner. If you are renting to someone who has never signed a lease before, you should require a cosigner to be added to the lease.
The cosigner can again act as a recommendation for the potential resident. You may not know exactly how the resident will treat the lease agreement, but a cosigner can vouch for the person’s potential to be a model resident. If multiple residents are living in the same apartment, ask for a cosigner from each party. This actually increases the need for a backup in case of a lease breakage or if the rent is not paid on time. Having multiple cosigners also increases the chances of finding quality residents for your apartment.
Most people renting apartments have steady jobs, but this is not always the case. If an applicant does not have the necessary means coming in to pay rent each month, they will need a cosigner. Sometimes a resident will have enough saved to pay rent for a few months and will use this as leverage toward proving their ability to successfully live in your apartment. However, savings are not a guarantee for the future. A month from now, the resident could run into an emergency, wiping out their savings. The resident could just have bad spending habits, and those savings could be gone before they pay rent.
Again, the cosigner can here act as a financial guarantee. Those without a steady income can prove that, in the worst-case scenario, someone close to them has the income to support them through the duration of the lease. Your instinct may be to trust potential residents in their statements of financial security. In the case of apartment rentals, it is best to air on the side of caution. If a potential resident cannot prove their absolute ability to pay rent for the duration of the lease, ask for a cosigner.
Residents need a cosigner in many circumstances. Most of these circumstances have to do with not having an independent backup. Younger renters, in particular, often have trouble proving that they can be great tenants, as they are just getting started in building credit, figuring out career paths, and may be renting for the first time. By asking applicants to add a cosigner to their application, you save yourself the headache of rude residents and not being paid on time.