How does being a guarantor affect your credit rating?

Who is a guarantor?

A guarantor is someone who helps another person get some credit, usually in the form of mortgages or loans. As a guarantor, you stand-in for the person borrowing money with a guarantee that you will pay back such a loan or lease if the borrower is unable to repay or the loan falls into default.

Guarantor loans and mortgages are most often the options when a person is having a hard time getting credit from lenders as a result of bad credit history. Some online platforms such as Nowloan also have a loan for bad credit specially designed for persons with bad credit scores.

Who can be a guarantor?

There are a few requirements to meet before a person can act as a guarantor in the UK. You have to:

•Be older than 21 years old

•Be financially stable

•Have a good credit history

In addition to this, a guarantor who is a homeowner increases the chances of the borrower getting credit. Usually, guarantors are people close to the borrower, such as a family member, friend, or close relative.

How does being a guarantor affect credit rating?

A lot of individuals show concern about the effects that being a guarantor will have on their credit history. One will find prospective guarantors asking the question, how does being a guarantor affect my credit rating?’ The answer to this is quite simple.

As long as the borrower keeps up with making their repayment at the right time, being a guarantor will not necessarily have a negative effect on your credit rating.

However, if the borrower defaults by refusing to repay the mortgage or loan and you are unable to make such repayments on their behalf, then such will be reflected in your credit report.

Just as it is with offline lenders, the situation is similar when using an online credit platform like Nowloan. Although Nowloan does not run a hard credit check on loan applications, once a loan is approved and repayment is not made at the right time, there may be implications on the borrower’s credit score.

Effects of bad credit on Guarantor’s borrowing

Having the blemish of a defaulted loan added to your credit history is not a pleasant occurrence, as it will usually lower your credit rating. A low credit rating can make it difficult for a guarantor to get a loan or mortgage in the future.

Guarantors with a bad credit rating who will like to take a loan may obtain a payday loan for bad credit offered by Nowloan even with the bad credit rating.

Financial Association

Besides the risk of adverse effects on your credit rating, acting as a guarantor may also result in the form of financial linking with the borrower called financial association. Financial association means that if you ever wished to obtain credit in the future, your credit history may be examined alongside the credit history of the borrower.

The financial association remains even after the borrower has made all repayments, and the account has been settled. However, you can remove a financial association by getting in touch with the corresponding credit referencing agency with a disassociation request.

Also, a guarantor who is a homeowner may have their home repossessed if the borrower defaults, and the Guarantor is unable to make the repayments.