Q&A February 2018 – What is a guarantor?

Welcome to our monthly Q&A session, where we shine the spotlight on some of the questions we get asked by our Noddlers.

This month, we’re taking a look at questions around guarantors – specifically what a guarantor is, what responsibilities they have, how they can be used and what the implications are for your credit score if you act as one.

What is a guarantor?

Put simply, a guarantor is an individual who agrees to take responsibility for repayments on a credit agreement or financial agreement, such as a rental contract, if you’re unable to. They will be required to sign a contract stating that they agree to this.

If you’re able to keep up with the monthly payments, then your guarantor would not need to do anything.

It’s if you find yourself in a situation where you’re unable to make the payments you’ve committed to that the guarantor would be expected to step in, so that the agreement is fulfilled.

Guarantors tend to be a close relative and to act as one, you’d need to be aged between 18 and 75 and have a good credit score.

When might you need a guarantor?

There are a few different reasons why someone might need a guarantor and guarantors can be used for different types of credit or financial agreements:

  • You’re renting a property for the first time – landlords might ask you to have a guarantor.  Why? Because they’ll want to be sure that they’re going to get their rent and having a guarantor gives them added security.
  • You want to take out credit but have a poor or limited credit history – if you have a guarantor in place, some lenders may be able to offer you credit.
  • You want to buy a house but don’t earn enough to meet a mortgage criteria – you might need to get a guarantor mortgage in place. These take into consideration your guarantor’s income and credit history as well as your own as part of your application.

What should you consider before agreeing to be a guarantor?

If someone close to you asks you to be a guarantor for them, it’s a good idea to ask yourself:

  • Are you confident that the person will be able to make all the payments on time every month?
  • Is the monthly repayment something they can comfortably afford?
  • Could you afford to make these payments on behalf of them if they cannot meet the commitment?

Will being a guarantor affect my credit score?

When you act as a guarantor on a credit agreement, you do take on a responsibility for the debt.

However, you shouldn’t see a record of the agreement on your credit report, as long as it hasn’t defaulted. The terms and conditions of different guarantor agreements will vary, but if the person you’re acting as a guarantor for is able to keep up with their repayments, this shouldn’t have any impact on your credit score.

We hope you found this useful. If you’ve got any more burning questions that you’d like to be answered next month – get in touch by messaging us on Facebook @noddleuk or tweet us @useyournoddle.