CFA: Cosigner services explained

EAST PROVIDENCE, R.I. (WPRI) -  If you're credit is in poor shape, you usually need a cosigner to help you get a credit card, loan, or even qualify for a rental.  But sometimes finding a cosigner isn't easy.

Call 12 for Action has learned there is a back up, and it's as easy as logging online.

When John Diggs found his apartment, his landlord requested he have a cosigner, but he didn't want to burden his family.

"My credit has some challengers," said Diggs.

Instead, he paid a company to cosign the lease for him.

Banking expert Janna Herron says the premise is simple:  for a fee, companies such as We-Cosign, Insurent, and Cosigner.com will guarantee your lease for a contractual period of time, even if you have bad credit or an unstable source of income.

"If you default, they pay the landlord the rest of the lease," said Herron.

Fees vary depending on the service, but you can expect to pay a percentage of your monthly or annual rent, typically ranging between 6-percent and 10-percent.

"You may have to pay some other fees, such as a sign-up fee, a processing fee, a background check fee, and those could easily add another 100 to 200 dollars.

Even though these services are designed for people with poor credit, people still need to qualify.

Each cosigning company has its own minimum income and credit score requirements and some will deny you if you have too many outstanding utility bills, evictions or a violent criminal background.

Call 12 for Action contacted the Better Business Bureau , who told us it's important to keep in mind that cosigning is a fairly new business practice, and could have the potential for abuse.

We also uncovered several complaints online.

If you're interested in one of these services, the Better Business Bureau says to do your homework.  Read a contract's fine print and make sure you understand what you're signing.

You can also check out a company's rating online.

For more information on cosigning services, visit the Better Business Bureau's website.