By Jim Donovan
PHILADELPHIA (CBS) – Maybe you have a few credit blips. Maybe you don’t have a steady stream of income. No matter the reason, it’s not uncommon for landlords these days to request a co-signer. But now as 3 On Your Side Consumer Reporter Jim Donovan finds, securing that “backup” is as easy as logging online. But it’s going to cost you!
When former NFL player John Diggs found this apartment, he knew he had scored touchdown. There was just one catch. He says, “My credit has some challenges, and the landlord requested that I get a cosigner.” Diggs didn’t want to burden his family, so he paid a company to cosign the lease for him. He says, “I didn’t know these kind of services existed.”
Janna Herron with Bankrate.com says the premise is simple: for a fee, companies like WeCosign, Insurent, and Co-Signer.com will guarantee your lease for a contractual period of time, even if you have bad credit or an unstable source of income. Herron says, “If you default, they pay the landlord the rest of the lease.”
With the financial crisis and a shaky job market, experts say these services are in demand. Frank Jakubaitis of WeCosign.com says, “We have people that are students, and then we have people that are mid-life age, and we’ve also co-signed athletes and lawyers and doctors.”
Fees vary depending on the service, but you can expect to pay a percentage of your monthly or annual rent, typically ranging between 6% and 10%. Also according to Herron, “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.”
Even though these services are designed for those with poor credit, applicants still need to qualify. Herron says, “They have their own minimum income and credit score requirements and some others will deny you if you have too many outstanding utility bills, too many evictions, or a violent criminal record.”
John Diggs was happy to have the option, and within days he had his keys in hand. He says, “It’s a sense of peace, a sense of warmth that I now have my home, and I’m on my way to re-building and re-establishing my life.”
Since this is a fairly new industry, if you’re interested in one of these services, the Better Business Bureau says you really need to do your homework. Be sure to read a contract’s fine print and make sure you understand what you’re signing.
For more information on the co-signing companies mentioned in this report click on the links below: