How does putting up collateral affect my credit score?

Putting up collateral for a loan generally does not affect your credit score directly. However, if you default on the loan and the lender takes possession of your collateral, it can negatively impact your credit score. This is because the lender will report the default to the credit bureaus, and the missed payments and repossession can stay on your credit report for up to seven years, lowering your credit score. On the other hand, if you make timely payments and repay the loan as agreed, it can positively impact your credit score by showing that you are a responsible borrower.