Does Being a Guarantor Affect Credit Score

Does Being a Guarantor Affect Credit Score

Being asked to be a guarantor for someone else’s loan is a big responsibility. Whether it’s for a friend’s car finance, a family member’s personal loan or a child’s first tenancy, agreeing to guarantee someone else’s repayments can offer them access to credit they may not otherwise qualify for. But before you say yes, it’s important to understand how being a guarantor might affect your credit score.

The short answer is being a guarantor does not directly affect your credit score — unless the borrower misses payments or defaults on the loan. At that point, the responsibility falls to you, and your own credit report could be affected.

In this article, we’ll explain how guarantor loans work, when your credit score is impacted, and what to consider before agreeing to take on this financial commitment.

What Is a Guarantor

A guarantor is someone who legally agrees to repay a loan or other form of credit if the primary borrower cannot or does not keep up with payments. Guarantor loans are common when the borrower has:

• A limited or poor credit history

• Low income

• Previously missed payments or defaults

• Recently moved to the UK

Guarantors are often parents, close relatives or trusted friends. The agreement provides extra reassurance to the lender, making them more willing to approve the application.

Does Becoming a Guarantor Affect Your Credit Score

Not immediately. When you agree to be a guarantor, the lender will usually carry out a hard credit check to assess your financial situation. This check is recorded on your credit file and may cause a small, temporary drop in your score — but it’s no different to applying for a credit card or loan.

However, once you become a guarantor:

• The loan itself does not appear as your debt on your credit report

• You are not financially linked to the borrower in most cases

• Your credit score remains unaffected as long as the borrower makes payments on time

So, your credit score will not suffer just because you’re listed as a guarantor.

When Being a Guarantor Can Affect Your Credit Score

Your credit score can be negatively impacted if:

1. The borrower misses payments

If the borrower fails to make their repayments, the lender will contact you to pay. If you also fail to keep up with payments, the lender can take legal action against you. Any late or missed payments you’re responsible for will be recorded on your credit file.

2. The loan defaults and becomes a debt in your name

In cases of default, the loan may eventually be passed to debt collection agencies or result in a County Court Judgment (CCJ) — both of which can have serious consequences for your credit profile.

3. You apply for credit and the guarantor check is flagged

Some lenders may view guarantor arrangements as a potential financial obligation. While the debt isn’t in your name, being legally responsible for someone else’s repayments could impact how much other lenders are willing to lend you.

Real-World Example

Kevin agreed to be a guarantor for his younger brother’s £7,000 personal loan. His credit score was unaffected at first, and the loan did not show up on his report. However, after several missed payments, the lender contacted Kevin to cover the arrears. He made the payments, and although his score did not drop immediately, the increased financial pressure affected his affordability when he later applied for a mortgage.

Meanwhile, Lisa became a guarantor for a friend’s car finance. The borrower kept up with payments, and Lisa’s credit profile remained unaffected. She later disassociated from the agreement after the loan was repaid in full.

Will the Loan Appear on My Credit Report

No, guarantor loans do not appear on your credit report unless:

• You are named as a co-borrower (not just a guarantor)

• You take over the loan due to non-payment

• You default on the payment yourself

Unlike joint loans or joint bank accounts, guarantor agreements typically do not create a financial association between you and the borrower in the eyes of credit reference agencies.

Things to Consider Before Becoming a Guarantor

Before agreeing to be a guarantor, ask yourself:

• Can I afford to repay the loan if the borrower can’t

• Do I trust the borrower to meet their obligations

• Will this affect my ability to get a mortgage or other credit

• Am I prepared to have my credit score affected if things go wrong

Always read the full loan agreement carefully, and seek advice if needed. Some people also choose to formalise expectations in writing with the borrower, especially for larger loans.

Can You Remove Yourself as a Guarantor

In most cases, you cannot remove yourself as a guarantor once the agreement is in place — unless:

• The loan is repaid in full early

• The borrower refinances the loan independently

• The lender agrees to release you, which is rare

This is why it’s crucial to understand the long-term commitment involved. You could be responsible for the full loan balance for several years.

Final Thought

Being a guarantor does not affect your credit score directly, but it creates a potential financial risk that could affect your credit in the future if the borrower fails to repay. It also involves a level of legal responsibility that shouldn't be taken lightly.

If you’re considering being a guarantor, think carefully about the borrower’s reliability and your own financial position. If managed well, the arrangement can be successful — but if it goes wrong, it could cost you more than just money.