Does being a guarantor affect your own credit rating?

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By Chloe Dickenson
Updated on Thursday 17 August 2023

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One way to borrow money if you’re looking for a loan or to buy your first house, for example, is to use a guarantor for a loan or a mortgage. As a borrower, there are several things to be aware of, but in our guide below, we’ll be discussing the meaning of a guarantor, what it means to be a guarantor, whether being a guarantor can affect your own personal credit rating and whether a guarantor has to be a homeowner.

What does being a guarantor mean?

Being a guarantor, such as for someone who needs one to be able to rent a property, means that you’re acting as a type of safety net for someone borrowing money. You’re essentially helping someone else to obtain a form of credit, such as a loan, mortgage or rental agreement by “guaranteeing” that you will be able to make their repayments if they’re unable to.

If the person you’re being a guarantor for fails to make their payments on time, the responsibility will fall to you so you will have to ensure that you can make the payments for them.

Who can be a guarantor?

There are several criteria that you need to meet in order to be someone’s guarantor. Firstly, you are required to be a legal citizen of the UK and you will need to be aged between 18 years old and 75 years old, although some loan providers may require you to be over 21 years old.

You will also need to be able to prove that you’re able to make the guarantee’s payments if they’re unable to. One way to show this is if you’re a homeowner, although it’s not an imperative part of being a guarantor. Furthermore, you will be required to undergo a thorough credit check so that the loan company can check whether you have a good credit history.

It’s also not imperative that you’re related to the person you’re being a guarantor for, but you should ensure that you know the person who’s applying very well and you may be required to prove that you have some kind of relationship with them.

Of course, each type of loan application will be different, as will the requirements set out by the loan provider, so be sure to double-check what’s expected of you when applying to be someone’s guarantor.

Why would someone need a guarantor?

We’ve already mentioned above that someone might ask you to be their guarantor if they want to take out a loan or get a mortgage and they will usually ask you to do this because they fit one of the following criteria:

  • They have little or no credit history (such as a young person who doesn’t have any form of credit yet but wants to get their own house or someone who is new to the country).
  • They’ve just started a new job or got their first ever job so they’ve only just started earning money.
  • They have a low salary so they’re unable to make large payments for rent or a mortgage right now.
  • They have a low credit score which makes it difficult to obtain any form of credit.

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Does being a guarantor affect your credit?

When deciding whether to be someone’s guarantor, it’s imperative that you’re aware of the potential complications and financial implications that you may be subject to.

Firstly, you must be aware of the financial responsibility that you’re taking on by agreeing to be someone’s guarantor. When you sign a guarantor agreement, you are agreeing to be responsible for any payments that the original borrower had. For example, if you’re a guarantor for someone who’s borrowed money to take out a mortgage, but they’re unable to make their mortgage payments on time, the responsibility will fall to you and you will have to ensure you can make the payments. 

When you first agree to be someone’s guarantor, the credit lender will carry out a credit check on you to see whether they think you’ll be eligible to make the repayments if the borrower is unable to. This is usually a ‘soft’ search, so it won’t show on your credit file and it won’t affect your credit score or your own ability to borrow money in the future.

However, if the borrower defaults on any of their payments and the responsibility falls to you, this may be added to your credit report and if you’re unable to make the repayments yourself, then your credit rating could be affected.

It’s incredibly important that you’re aware of all the potential financial risks of being someone’s guarantor and it’s imperative to ensure you’re a guarantor for someone you trust. Of course, it’s not always possible to tell whether the person you’re being a guarantor for will be good for making their payments on time, but you should ensure that you have a good, trusting relationship with them as it’s a big financial commitment to make.

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How do I get out of being a guarantor for a tenancy agreement?

Once you’ve agreed to be a guarantor for someone, you will effectively enter into a contract, which can be tricky to get out of, however, it’s not totally impossible.

It depends on the lender and whether they agree to let you out of a tenancy agreement guarantor contract, but you may be able to get out of being a guarantor in some of the following circumstances:

  • If the landlord permits you to surrender your legal obligations as a guarantor. If this is the case, you may need to obtain written permission from the landlord.
  • If your contract as a guarantor actually includes a clause that allows you to withdraw from the agreement within a certain amount of time (such as three months into the agreement, for example).
  • If there are any changes or amendments to the original tenancy agreement (such as a change in the price of rent), the guarantor agreement will usually come to an automatic end.

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