The Mistake That Plunged My Credit Score 200 Points

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In the fall of 2011, I went on an episode of “The Suze Orman Show” to ask her how to repair my credit, and I knew I was in big trouble when she told me there was nothing she could do. I had figured, there must always be ways to raise your credit score.

Little did I know how much it can hurt your credit score to co-sign a mortgage for a friend who ends up not making her payments.

It was just before the housing market crashed in 2008, when a close friend decided to make the leap from renting to homeownership. Like myself, she was a single mom. We had known each other since grade school, participated in the same Brownie troop. We talked on the phone daily and had over 20 years of friendship between us.

When, in the eleventh hour, the bank told her she needed a co-signer in order to close on the property, I said I would do it. I don’t even remember if she asked or if I just volunteered. It was a knee-jerk reaction to help a friend. I didn’t want to see her lose the opportunity.

That was my first mistake.

I Didn’t Realize How Bad It Was

I was self-employed as a freelance writer. I knew the repercussions of co-signing … sort of. But I didn’t fully investigate exactly what would happen if she missed a payment because I assumed it wouldn’t be an issue. When I originally signed, I told her I didn’t want to be on the loan for more than a year. The plan was that she would refinance her home after a year of payments and get a new loan without me on it.

RELATED: Can Paying Off Debt Hurt Your Credit Score?

I knew how hard she worked to get to this point and felt that she would value her credit just as much as I valued mine.

I had to find out the hard way that co-signing on her condo increased my debt-to-income ratio (how much I owe versus how much I earn), which is not a good thing when you’re trying to buy a house or make any major purchases. At the time, I was trying to sell my house in New Jersey to move to Los Angeles. Mistake number two.

Everything went well for the first year. Unfortunately, the market was beginning to crumble. Before the real estate crash, banks were handing out refi’s like candy, but when my friend bought her home in 2009 they had started tightening their belts. She was unable to refinance me off her loan.

She Lied, and I Suffered

It wasn’t until the fall of 2009, when I was thinking about getting satellite television, that I checked my credit report and discovered $10,000 in past due payments. My friend had missed not one, not two, but three mortgage payments!

(Looking to learn more about mortgages? Check out the loans and mortgages section of our Knowledge Center.)

My credit score plummeted from 800+ to the low 600s after she defaulted on her mortgage. Several credit card companies dropped me, while others lowered my credit limit to the balance due.

RELATED: 7 Ways to Raise Your Credit Score

I was embarrassed and ashamed about the multitude of letters I received from my creditors telling me they were cutting off my line of credit. Basically, I was left with no credit, no access to more credit and a horrible credit score. I was devastated, all because of my own mistakes.

Mistake number three: If I had been monitoring my credit (learn how here), I would have known the first time she missed a payment.

Were there extenuating circumstances that somehow explained her behavior? No.

She hadn’t lost her job and didn’t experience any major medical emergencies, so I don’t know how she managed to get so far behind. To this day, I still don’t know what happened–even while she was missing her payments, we were talking on the phone nearly every day, and it never came up. Whenever we talk about her delinquency, she’s apologetic, but has never tried to justify it.

  • Lisa

    I can’t even imagine all the heartache you’re going through. I co-signed a very small student loan for a friend and what a huge mistake that was. I’m now diligently working to take the same actions and we’re no longer friends as a result. What a mess. 

    • Sibylla Nash

      Thank you Lisa!  It is a mess!  I’m glad you are working through it as well. All we can do is learn from our mistakes and blare it from the foothills and the mountaintops to others in hopes that they don’t follow in our footsteps.   

      • Daunik7

        the best part is that you are taking responsibility for your pwn mistakes and not blaming it all on your friend which would be so much easier, but would also put you in a negative space and keep your heart bitter. So keep it up because the more you own up to it the more success you will have in your own personal life as this will continue to drive you to be better. Good luck

        • Sibylla Nash

          Thanks Daunik7! My fingers are crossed that this will be over soon.

      • Jackson

        I have always heard, never lend a friend money or co-sign.  but somehow we always think that we are the exception to that rule, and I think thats what get us especially women in trouble.  I lent my BEST friend $1000, long time ago, could not believe what I had to do to get it back. I haven’t  spoken to her in over 20 years.  So when I was asked to co-sign for a sibling the answer was NO. still luv ya though.  There is a reason it is one of LIFE rules.

  • Jojo

     I agree, if you have to choose between friendship and credit, just
    choose your credit.  It has the biggest impact on your life and family. 
    It may sound cold, but it’s a lesson many of us learn the hard way.

    • Maria

      and if you lose friends over something like this, they were not your real friends to begin with.

  • Jennifer T

    Great article!  I would even go as far as to include family members as well!

    • Jackson

      EXPECIALLY FAMILY

      • Jacksonap

        especially family,  was excited by the artical

        • http://twitter.com/jeneller Jenelle Romero

           True that!

  • Katherene`

    First of all Sibylla, I’m sorry that you are going through this.  And I’m sorry for others who has gone through or going through the same.  This is a hug lesson in life not what to do when it involves money and friends. The cost of not only money, but friendships are torn apart and never again the same.  I applauded you for letting go the bitter and building on the positive.  Your mistake can now be a sounding board for all to learn from.  I can see where your experience will be very beneficial in helping others.  Please continue to share your story.  One never knows how this can turn into a business venture for you.  Blessing to you! 

    • Sibylla Nash

      Thanks Katherene! I definitely feel as though something positive has to come out of this and am open to the possibilities.  

  • Anndrex1

    My same story. I actually bought a has for a friend and rented it out to him. He stopped making payments. The house was burglarized  while i had it on the market for sale (Jacuzzi stolen, water left running, two floors had to be totally gutted and rebuilt with my money). Insurance would not pay because the property was vacant.The Credit scenarios you mentioned all happened to me. It forced me to live off cash. And now I actually can pay down my debt because I don’t have credit cards to rely on. The house is rented out now but that in itself is a head ache. 

  • Susan

    I’m living the same story with the exception that after a couple years of no payment….in the final moment before the short sale she paid all the catch up and became current again.  Now, the pattern is miss payments for a couple months, payup, miss, payup.  She does not qualify for refinancing and won’t sign papers to sell.  This has been going on for several years now and I am debt free except for this dern mortgage that I’m on.  IS THERE ANYWAY TO STOP THIS MADDNESS or is this my new reality for the next 20 years??? At which time I’ll be to old to get a mortgage.  Thank you so much for this article, I’ve felt I’m the only one in the world living this hell.  How do I get off this mortgage?

    • Sibylla Nash

      Susan, I’m so sorry for your situation and definitely feel your pain!  It’s unfortunate that she’s so unwilling to be of more help.  Even though she does not qualify for refinancing, you should check and see if the bank has a program for her to get you off loan. She has to become current in payments and be employed but there is a way to do it. I remember early on when I still had hope, our bank told me about this – I’m just blanking on the name of the program/loan.  

  • Maria

    I have a similar story. 
    A fiance of 3 years insisted that he wanted a new car and the only way to get it for him was my name on the loan. So I did it. He also needed 3 root canals in one year and I co-signed for the credit card that’d enable him to get the procedures done. A year ago we decided to end the relationship, and a couple months after that he just dropped off the $30k vehicle on my driveway with 2 missed payments. The car was about $6k under water, and had some minor damages here and there. I spent overall about $2k to get the loan to current and make the repairs. The dealership was very sympathetic and quickly helped me refinance that and my other vehicle for a new one.
    A month later? You guessed it! I get a call from the credit card company saying that he hasn’t made a payment in 2 months. I also found out that he purchased a new full bred puppy for himself.
    So now I have a $1000 credit card to pay off.
    Lesson learned?
    NEVER UNDER ANY CIRCUMSTANCES CO-SIGN FOR ANYONE.

    • sonneithia lovejoy

      WOW….I have a similar story but worse I think. I had a fiance for 2 yrs, the relationship ended,shortly after I returned from Afghanistan. To make matters worse I co-signed for a truck for him while we were together, and had a car in my name as well. To complicate thngs worse when i went to trade in my old car for my new one, my mother informed me that she had lost her job…again, and her car had been repoed, and the car she got for transporation and had paid cash (so no car payments she owned the title)  for after the repo , she sold to another person without a contract being drawn up AND THAT PERSON STILLS OWES HER $$ TO THIS DAY. Like a dummy (trying to do the right thing and it was family, my mother afterall) I gave her my old car and put her on the lease to finish up the payments. made them less so she could afford to.                                          

      Fast foward a couple of months when all this came out after my break up with my fiance, after i had co-signed for his truck (thinking she had made payments, car was paid off and only had my car in my name and truck i co-signed for) I found out what my mother did, so now have three vehicles with my name on them. My car, which i pay for, my old car, which my mother drives (shes been missing payments and its not paid off), and the truck i cosigned for my ex fiance. TALK ABOUT BEING PISSED OFF, IM PAST ANGRY, ESPECIALLY AFTER I PULLED MY CREDIT SCORE!!!!!

      I didnt know, about my mother’s situtation and if so i wouldve never given her my old car and wouldve used it as a trade in at the dealership as i had arranged to do, and def wouldn’t ve have co-signed truck for my ex UNDER THE ASSUMPTION my old car had been taken care of so only one vehicle in my name. Needless to say delaership informed me, my name was infact still on the car so im responsible for it as well as my mother, and you guessed it, my ex has been late on payments and finance company called me to see if I knew or would correct porblem, did I mention hes MY EX!! and yes I pay my car note for my vehicle.

      Im now trying to clean up my credit, hired a firm to do just that, and Im not sure what to do to decrease my debt to ratio income with all these vehicles. if i take the car from my mom, she wont have transportation, my ex won’t give up the truck, and I have to keep my car because its my transportation. So any ideas, I would greatly be happy to get them. TALK ABOUT A WELCOME HOME GIFT FROM MY 1YR LONG DEPLOYMENT TO AFGHANISTAN….SOOOO MAD. BY THE WAY INCASE YOUR WONDERING MY AGE,  I JUST TURNED 23 LAST WEEK.  
      NEVER again will I HELP anyone out with a loan or anything of the sort. I wont even loan $$ to someone now. I dont CARE what the circumstance or relation/friendshipship the person has to me my answer will ALWAY be from now on…..NO! and HELL NO, if they ask twice!

    • sonneithia lovejoy

      WOW….I have a similar story but worse I think. I had a fiance for 2 yrs, the relationship ended,shortly after I returned from Afghanistan. To make matters worse I co-signed for a truck for him while we were together, and had a car in my name as well. To complicate thngs worse when i went to trade in my old car for my new one, my mother informed me that she had lost her job…again, and her car had been repoed, and the car she got for transporation and had paid cash (so no car payments she owned the title) for after the repo , she sold to another person without a contract being drawn up AND THAT PERSON STILLS OWES HER $$ TO THIS DAY. Like a dummy (trying to do the right thing and it was family, my mother afterall) I gave her my old car and put her on the lease to finish up the payments. made them less so she could afford to.
      Fast foward a couple of months when all this came out after my break up with my fiance, after i had co-signed for his truck (thinking she had made payments, car was paid off and only had my car in my name and truck i co-signed for) I found out what my mother did, so now have three vehicles with my name on them. My car, which i pay for, my old car, which my mother drives (shes been missing payments and its not paid off), and the truck i cosigned for my ex fiance. TALK ABOUT BEING PISSED OFF, IM PAST ANGRY, ESPECIALLY AFTER I PULLED MY CREDIT SCORE!!!!!
      I didnt know, about my mother’s situtation and if so i wouldve never given her my old car and wouldve used it as a trade in at the dealership as i had arranged to do, and def wouldn’t ve have co-signed truck for my ex UNDER THE ASSUMPTION my old car had been taken care of so only one vehicle in my name. Needless to say delaership informed me, my name was infact still on the car so im responsible for it as well as my mother, and you guessed it, my ex has been late on payments and finance company called me to see if I knew or would correct porblem, did I mention hes MY EX!! and yes I pay my car note for my vehicle.
      Im now trying to clean up my credit, hired a firm to do just that, and Im not sure what to do to decrease my debt to ratio income with all these vehicles. if i take the car from my mom, she wont have transportation, my ex won’t give up the truck, and I have to keep my car because its my transportation. So any ideas, I would greatly be happy to get them. TALK ABOUT A WELCOME HOME GIFT FROM MY 1YR LONG DEPLOYMENT TO AFGHANISTAN….Extremely ANGRY, especially at myself for being to nice and trusting. BY THE WAY INCASE YOUR WONDERING MY AGE, I JUST TURNED 23 LAST WEEK. NEVER again will I HELP anyone out with a loan or anything of the sort. I wont even loan $$ to someone now. I dont CARE what the circumstance or relation/friendshipship the person has to me my answer will ALWAYS be from now on…..NO!!! and HELL NO, if they ask twice!!

  • Eglos1986

    I had put my ex’s dental in my name because he couldn’t get any credit. Plus there were credit cards in my name that were used for him. I also had cards in my name that were for my mother. After we split, he decided he was not responsible for his part of the debt and my mother just couldn’t pay me her part. I was 22 and had to file bankruptcy because I am disabled and could not afford all the payments. My current fiance had cosigned a car loan for his ex, and she has missed payments. His score is not that great now and neither is mine. So when we  needed a new car (both of ours were on the verge of death), we had no choice but to put both of our names on the car. I do not think I made a bad decision there. I know things can change, but I do not see us splitting up any time soon. We are actually trying to have a baby. We have started to rebuild our credit, but ended up with a bit more credit card debt than we wanted. Emergencies came up and we had no choice. But we fixing it. I have learned my lesson though. I will not get something in my name for someone I know may not make payments. It is tough to learn this the hard way and I hope others read the article and think twice before helping someone, even if it is the right thing to do.

  • Lisa

    Sibyllia, Thank you for sharing your story.  I will sending this post along to my daughter and son.  A very timely lesson for all – especially how you handle it.  I am glad this did not interfere with your plans to move to LA.  Good advice also on letting a friendship end if it has to.  
    I am going to pass along the comment from Jackson about saying NO but still love ya!  I may actually use that line one day.

  • ranavain

    I’m so sorry so many people find themselves in this situation, but I have to say that I think people might be taking away the wrong message from all of this. To me, the motto should not be to never lend money to friends or relatives. It should be to never take on debts you can’t afford. If you can’t afford to pay two mortgages, don’t co-sign that second one. That’s why it’s called co-signing… you’re an equal party to that loan. Nobody has 100% job security. People need to learn to take on debts that they can handle… and I’d say it’s a stretch for most people to really be able to afford one mortgage, let alone two.

    But I lend money to friends and family all the time, because I live by the rules of 1) not taking on debts I can’t afford, and 2) I don’t lend money that I can’t live without. I don’t expect those loans to be paid back. If they are… great! If not, that’s what I expected, and I was still able to help out a friend in a time of need. Separating business and personal seems so cruel sometimes. It’s fraught with challenges, but if people were just in general more careful about debt, it would not ruin friendships the way it has.

    • Sibylla Nash

      Great point! It’s true, it makes it a lot easier to “loan” money if you don’t have an expectation of getting it back. 

      I think the bigger take away or the point I was trying to make is not so much the fact that she missed her payments, it’s the lack of communication after it happened.  We could have figured something out to minimize the damage if I had known she was in trouble.

      • ranavain

        Oh goodness yes! If you get into an arrangement like this with a friend or family member, there should definitely be an implicit agreement that you’re willing to help each other out if things get sticky, and that communication is key!

  • robin

    I saved a co-worker from making that same mistake when a relative asked her to co-sign.   She was under the mistaken notion that she could file a quit claim and not be held liable if her relative failed to pay.   When I told her a quit claim does NOT release her from the loan liability she quickly changed her tune.

  • Marlene

    After reading this story what hit me right away is this friend could’t actually afford the transition to homeownership. It sounds as though she couldn’t afford any emergencies that would occur in her new home. What if she finds mould or pipe bursts? So, I follow Judge Judy’s advice: if you loan money to a friend you better be prepared to give that money away to keep the friendship or lose the friendship and get your money back…

  • mbgitw

    I once took the equivalent of USD 4,000 from my CC to loan a friend who was having a lot of financial trouble (about to be evicted). I felt so sorry for her. She promised to pay me back the money by the end of the month. I honestly don’t know what possessed me to do that. Of course she didn’t pay it back at the end of the month and I had to pay interest on that money every month for nearly a year before she paid me back. The only reason our friendship survived this is because she decided on her own to pay me interest as well which I thought was nice of her. However, I learnt my lesson.

    Never again in my life will I loan out money I can’t afford to lose!

  • http://www.facebook.com/profile.php?id=615763230 Cherry Davis

    If you need a co-signer on the loan than you can’t afford the loan.  She should have bought a smaller property or better still not buy a home at all since she likely couldn’t afford a place on her own.  Also if her own family didn’t co-sign that should have been a red flag that they didn’t trust her to be responsible and didn’t want to take a chance or her entire family has awful credit (another red flag).  I couldn’t imagine asking someone to co-sign a loan for me but I’m very conservative about finances.  It’s a shame that she will likely be paying this debt for decades since her ‘friend’ will likely never pay off the bill and won’t care about her credit.  She’ll likely declare bankruptcy and move on …

  • Jan

    I was lucky – the only thing I ever co-signed on was a car loan for my daughter, on the conditions that she A) have the money automatically taken out of her account every month to pay it and B) that I get a copy of her statement directly from Toyota every month.  She’s almost paid off and I think it actually has helped my credit, as it’s another bill paid like clockwork.  Of course, I also threatened to kill her (ha-ha) if she screwed up…..

    • aokimoonchild

      You were lucky. I lent money to my son who swore up and down he would pay me back and even sent me a written payment plan… I never saw a dime back.

  • Hypatia

    Thank you for sharing your story. It helps me to know there are other people who have gone through similar situations and that there is hope. While I was in college I co-signed for someone who I thought was a friend, also not really understanding what co-signing meant. I never even thought about the situation years later until I started to get calls about default loans. Come to find out, this “friend” used my name for 2 other loans semesters later without my knowledge. I’m still dealing with this issue a year later as Sallie Mae refuses to release me from the loans I had no knowledge about. All I can do is continue to pay down my own student loans and only use my credit card for emergencies. I wish there had been a class before graduating high school that discussed finances so I had been better aware. Definitely a topic I will be bringing up to my kids whenever that day comes.

  • deskplant

    - A forced sale was the ony solution and should have been started at 3 months late. As a co-signer you also have co-ownership which means you can take legal action to give you the power to sell without her consent or force her to buy you out, thereby getting you off the mortgage.
    - Note, $25k more is $35k owed. Also any negative equity will still be owed if the sale price is a shortfall value. A civil case could be brought maybe to recoup this personal loss.
    - Credit damage can happen in marriages when one partner has a financial ‘lockout’ policy. Most couples ‘co-sign’. This type of partner will create havoc accross the whole credit spectrum for a woman.
    - Credit can be repaired but it’s best if you have your own income to do it, another problem for women relying on husbands as a breadwinner.
    - Credit check companies can have incomplete or just plain wrong data. Check it, and where you think it may be hard for them to prove even if right, challenge them. If they can’t prove it they should have to remove it. Check local laws.
    - Bad debts and missed payments have a time limit on your account, know what this is and plan around it as well. Make sure it’s cleared from your report.
    - And if a credit repair professional can’t help you over missed co-ownership payments, don’t hire them. Financial messes get much more complex than this case. The routes to success are standard ones but can be slow, messy and stressful. Good luck.

  • Rose_c_design

    Haven’t felt so compelled to reply in a long time …  While having “gone there”  in a professional trusting family, and being single now and always standing on my own two feet (bank loans accepted), whilst getting angry with financial institutions that Insist on a guarantee, as if I might not, and thereby walk away.
    I see so much in your article.  I am writing a book myself, in a different country, but empathise anyhow, in light of your plight as you saw it, and what you are doing now to heal over. 
    There are so many contractual and legally available options, small and large, the worse part is accepting you didnt or couldnt take them, be it energy, resources or ”head sand”  limits that restricted you.
    Trust and Communication are such big issues and catalysts for women in financial problems.  They contribute so much to our own acceptance, and therefore speed of progress, or healing.
    Where “we lean hardest on those we love the most” becomes a priviledge or a burden?? and that “lessons in life are a gift”?  – being a forgiving person I have choked on these several times, the most over how long you let it hold you back.  Your friend needs to hear one day what it really cost you, for you both.
    Good luck, good management and good times ahead.  R.

  • Diane

    I co-signed for my boyfriend’s student loans while in college, not thinking about the repercussions.  I got lucky – we married.  I can’t imagine what would have happened had we split up and he didn’t make payments!  Lesson learned indeed.

  • aokimoonchild

    umm… you’re not on your way to being debt-free. You owe 55,000$ in missed obligations on a house in NJ… good luck.

  • Grace Conyers

    I did something very similar to what you went through. Except, the co-owner and I were in the same house — I was a college student needing cheap rent, and paying my part of the mortgage was cheaper than renting. He was a good friend and colleague at the time we schemed up the plan.

    I can honestly say it was the most interesting, educational, and hellish experience of my financial life. I’m lucky another colleague of mine knew the mortgage systems in and out since he’s a realtor in his spare time. He managed to help us get out of foreclosure, into a short sale, and out of the situation in less than a year.

    My credit is still suffering the blow, but I’m also learning how to claw my way out of the horrible hole I’m in. I hope to be in the same situation as you in less time than it seems!

  • fala

    You are not out of debt.. You still owe whatever she has missed.. If that house is sold and the debt is still higher than the cost of sale you two will pay..