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Can a guarantor have bad credit?

A guarantor helps someone with no credit history or a low credit score to borrow money. They guarantee to pay the debt if the borrower cannot afford to. A guarantor isn’t likely to be accepted if they have bad credit, as it would be too risky from the lender’s perspective.

4 min read
Guarantor with bad credit

What criteria do lenders look for in a guarantor?

Each lender will use their own guidelines when it comes to assessing guarantor loan applications. But they all want assurance that they will get their money back. So they usually look for at least the following criteria in a guarantor:

  • Over 21 years old
  • A good credit history
  • Able to afford the repayments if the main borrower can’t
  • Preferably a homeowner, depending on the lender

You can choose almost anyone to be your guarantor as long as it’s someone you trust (and they trust you). Most lenders won’t accept spouses as they’re usually financially linked to you already.

Does a guarantor have to have a credit check?

Yes, the lender will want to assess the risk of lending to you. So they’ll run a credit check on your guarantor to make sure they’re a reliable borrower who will repay the debt if you can’t afford to.

What credit score does my guarantor need?

Each lender uses their own criteria and each credit reference agency uses different scoring methods. But generally speaking, lenders want your guarantor to have a good credit score - the higher the better. Anyone with a low credit score is unlikely to be accepted as a guarantor.

Lenders use previous financial behaviour to predict future behaviour. So if your guarantor has a good credit history, it should work in your favour, as it’ll indicate they’re a responsible borrower.

From the lender’s perspective, this will help to reduce some of the risk involved in lending to you if you’ve got a poor credit history.

Read our blog to find out what is a good credit score in the UK.

What happens if a guarantor can’t pay?

You can use a guarantor loan to build up your credit file by maintaining your repayments on time, every time. That way, your guarantor’s credit history won’t be affected.

But if you can’t pay, then the liability for the debt will pass to your guarantor. If they also can’t afford the repayments either, then missed payment markers could be applied to both of your credit reports.

You could both be chased for payment and receive a default after three to six missed payments. This negative marker would then remain on your report for six years and could affect your ability (and your guarantor’s ability) to get credit in the future.

Legal action, like CCJs, could be taken against you and your guarantor in the event of non-payment. If your guarantor is a homeowner, they could risk losing their house.

Alternatives to a guarantor loan

If you had a poor credit history, there are other options you could look into, aside from a guarantor loan, such as:

1. Bad credit loan

Bad credit loans are designed for people with a poor credit history, who may not be able to get a mainstream loan. They can be used for almost anything you like (apart from gambling or anything illegal).

Bear in mind that they usually have higher interest rates to offset some of the risk to the lender. Any missed or late payments will have a negative impact on your credit score. But if you borrow responsibly and maintain your payments on time, every time, then you will rebuild your credit score.

Check your eligibility here without affecting your credit score.

Bad credit loans are designed for people with a poor credit history, who may not be able to get a mainstream loan. They can be used for almost anything you like (apart from gambling or anything illegal).

2. Credit builder card

Another way you could improve your credit score is to take out a bad credit credit card, otherwise known as a credit builder card. If you maintain your payments on time, every time, then you can rebuild your credit history.

These cards are suitable if you only need to borrow a small amount. They often come with high-interest rates to balance out the risk associated with lending to someone with bad credit. You have a higher chance of being accepted for one of these cards than a mainstream card if you have a poor credit history.

3. Secured loan

A secured loan could be suitable if you are a homeowner looking to borrow a large amount of money (over £10,000). Secured loans are attached to your property, which gives lenders the reassurance they need to lend large amounts of money with low interest rates - despite your bad credit history.

That said, each lender uses their own criteria and there’s no guarantee of acceptance. Your home could be at risk of repossession if you fall behind with the repayments.

Check if you’re eligible for a secured loan here.

4. Budgeting loan

If you’re struggling to pay for essentials, and you’ve been claiming certain benefits for at least six months, you may be eligible for a Budgeting Loan from the Government. They help people to cover the costs of rent, funeral costs or footwear for example.

For more information see the government website.

5. Credit union loan

You could consider joining a credit union where all members pool their savings together. You can then request a loan using these funds, usually for a small amount with low-interest rates.

Members normally share a common bond. They may live in the same area or work for the same employer for example. Find your nearest credit union here.

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Intelligent Lending Ltd is a credit broker working with a panel of lenders.