As it is said, when it comes to money, no body is to be trusted. Co-signing a loan can certainly affect one's credit report adversely, even if the loan is paid on time. The loan that is co-signed by you will show up in your credit report, just like other debts that you have. Regarding this Maxine Sweet of Experian Credit Bureau says, “Whatever the lender reports each month about the status of that account will be reported for each individual whose name is associated with the account”.

Co-signing a personal loan with your friend or any relative would increase your credit utilisation ratio and this may be an obstacle in getting loans further in life. The loans that you co-sign increase your outstanding debts and hence the ratio of your borrowing limit to existing debts increases that is not good for your credit score. As a result, you might find it a daunting task to get a personal loan.

A personal loan is based on the borrower's capacity and character to repay. This is judged by the credit score of the borrower. But, co-signing a personal loan will add to your debts and thus, the lender might reject your loan application on this count. Any late payments by the loan taker can show on your credit report and if your borrower defaults, the lender can ask the outstanding payments from you.

So, to safeguard to credit profile and to make sure that you get a personal loan without hassles, never co-sign with anyone. But, if the borrower is a close acquaintance and you have to co-sign on his personal loan deal, study the terms of the loan and the notification rules before signing. Make sure you're getting the same documents as the person you're co-signing for, and require the borrower to provide you with proof of payment each month or give you access to the online account information so you can check the balance and payment status yourself, recommend financial experts.