I’m only 25 and my mom has tanked my 700-plus credit score after falling behind on payments for an auto loan she had me co-sign when I was 18. How do I stop her from derailing my future?

What this means and what you can do

When you co-sign a loan, you are telling the lender that you agree to be responsible for the debt. If the borrower can’t repay the loan and associated fees, you will need to, or it could hurt your credit score. If the loan goes into default, the car could be repossessed, and that negative mark will show up on your credit report since the credit bureaus will report the car loan as yours.

According to Equifax, “Once they're recorded on your credit reports, [car repossessions] can impact your credit scores for up to seven years. Credit behaviors that typically lead to a repossession, such as missed payments and defaulted loans, may also result in negative marks on your credit reports.”

With a low credit score, it could be difficult to qualify for a loan like a mortgage. Even if you could, you may be limited in your options. Lenders may not offer you the most competitive interest rates. You could pay more in interest charges, costing you tens of thousands of dollars or more throughout the life of your mortgage.

You may also have to pay higher car insurance premiums with a lower credit score.

You can get caught up on your mom’s car loan or contact the lender and negotiate a repayment plan to avoid a default. This could cost you thousands of dollars — money that you may be saving for goals like getting married and purchasing a home.

If possible, you can sell the car yourself and arrange for some other form of transportation for your parent. You can then use the money to pay off as much of the loan as you can. Financial guru Dave Ramsey recommends doing this and avoiding voluntary repossessions.

“If the sale covers the remaining balance of the loan, you’re home free! But if it doesn’t, you’re better off taking out a small loan for the difference,” says his website. “Paying off that smaller loan will be a heck of a lot better than paying the deficit balance in a lawsuit (not to mention all the fees and having a repo on your credit record).”

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Rebuilding a credit score

It is possible to rebuild your credit score once you’ve dealt with the loan.

Once that loan is out of the way, continue what you’re doing to positively affect your credit score before. Pay off your loans on time and avoid getting any new loans. If you have credit cards, keep your balances low and pay off the balance each month.

The key is consistent behavior and time. It’s hard to say how long it will take for your score to go back up as high as you’d like. However, you can monitor it to see where you stand periodically.

To protect yourself from getting into a similar situation, avoid co-signing on loans if you’re unsure whether the borrower will pay back the loan on time.

How to disentangle from a loved one’s finances

Setting boundaries is key if you want to separate your finances from your loved one.

Although it can feel uncomfortable, it’s worth it to sit them down and make it clear what you’re willing and not willing to do in terms of your finances.

For example, you’re no longer going to agree to co-sign on any loans or lend them money to pay back a loan. Or if you do offer money, set a limit on how much and stick to it.

You could also offer to help them with strategies to manage their money. If they’re not willing to accept your help, the best you can probably do is offer educational materials and step back.