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If you become a student loan co-signer through forgery, you should report this identity theft to the police immediately and file a report with the Federal Trade Commission (FTC).
Understanding what additional steps to take is crucial in recovering your identity. Disputing the account with all three credit bureaus — Equifax, Experian and TransUnion — after you’ve filed a report can help you get it removed from your credit reports.
Why would someone forge a co-signer signature?
To qualify for a private student loan, borrowers typically must have a good credit score, a low debt-to-income ratio and a steady income. If a borrower cannot satisfy all of a lender’s requirements to borrow, some companies provide the opportunity to add a co-signer, whose credit score and financial history are used to determine interest rates and terms.
Getting a co-signer has the potential to help borrowers secure the financing they need when they can’t qualify for a private student loan on their own. Yet some student borrowers are unable to find a loved one with good credit who is willing to accept the risk of co-signing, and that can be frustrating.
Unfortunately, some would-be borrowers take their frustration too far. It’s not unheard of for someone to forge the name of a friend or family member as a co-signer so they can get the financing they want or to get a lower interest rate. No matter what the motivation, forging someone else’s name on a loan application is loan fraud, and it’s illegal.
What are the consequences of being a cosigner when you didn’t sign up to be?
Someone adding you as a cosigner without your permission can have several negative consequences. The debt will be added to your credit reports, increasing your debt-to-income (DTI) ratio. As a result, it can make it more difficult for you to qualify for an auto loan or mortgage.
Another consequence is that it can affect your credit score. When someone adds you as a cosigner, a lender performs a hard credit check to review your credit history, which may temporarily ding your credit. And If the person who added you makes a late payment, it can cause your credit score to suffer a more significant drop.
What are the legal rights of a co-signer?
Co-signing for a student loan (or any other type of credit) is a major financial commitment — it’s as serious as if the co-signer is taking out a loan for themselves. When you co-sign for someone else, you’re equally responsible for the debt. If the primary borrower fails to repay, the lender could come after you to try to collect the debt, and your credit could be damaged as a consequence.
Many lenders are not willing to release co-signers from loans, even after the primary borrower has put themself in a position to qualify for financing on their own. Instead, if you want your name to come off a loan as a co-signer, the primary borrower may need to try to refinance the debt in their name only.
However, there are some exceptions to this rule. Some student loan companies, for example, offer a co-signer release after the primary borrower meets certain requirements, such as a minimum number of on-time payments and a demonstration that they can make the remaining payments on their own. Yet even if a co-signer release is an option, the request must typically come from the borrower.
What should you do if you’re a victim of fraud?
Finding out that you’re a victim of fraud can be unnerving. And if you discover that a family member or friend forged your name on a student loan, the betrayal can make the situation even worse.
If you are a victim of student loan fraud, here are some steps you can take to try to recover.
- Freeze your credit reports. Federal law allows you to freeze your credit reports with Equifax, TransUnion and Experian at no charge. However, you will need to visit each credit bureau website individually to take advantage of this right. Placing a security freeze takes your credit report out of circulation so no future lender can access it unless you unfreeze your report first. This won’t undo any past fraud, but it can prevent someone from opening new fraudulent accounts in your name as a co-signer or primary borrower.
- File an ID theft report. When someone uses your personal information to fraudulently open a credit obligation in your name, it is a form of identity theft. You can visit IdentityTheft.gov to report the theft to the Federal Trade Commission (FTC).
- Dispute the account. Once you have an official identity theft report from the FTC or another law enforcement agency, you can send a copy to all three credit bureaus and the student loan servicer. When a credit bureau or loan servicer receives your dispute and ID theft report, it must remove and block the information from your credit report within four business days per the Fair Credit Reporting Act.
The bottom line
It can be unsettling to discover that someone has used your personal information and forged your name as a student loan co-signer. And if you suspect that a loved one committed the fraud, the discovery can be even more upsetting.
On a positive note, you have rights as a victim of fraud. There are actions you can take to report the crime and make sure that the fraudulent account is removed from all three of your credit reports.