What a guarantor is#

A guarantor agrees to take on another person's payments if they can't make them. Usually close friends or family helping someone they trust get a credit agreement.

You might be asked as a parent or guardian when your child takes their first steps towards renting or owning a home — moving away for university, or getting onto the property ladder. You act as a safety net, guaranteeing their landlord or lender that you can cover the payments if they can't.

It isn't a formality. You're signing a legal contract to pay on behalf of someone else, so give it careful thought.

If that person doesn't keep up, it's your responsibility to pay. You have the same obligations as the original borrower, and a landlord or lender is legally entitled to ask you for the money.

What lenders look for#

Before you can become a guarantor, lenders typically check:

  • That you have a good credit score yourself. They may run a soft check to see.
  • That you can afford the repayments. They may want evidence of your salary or available savings.

These checks let lenders confirm you could repay the debt if required.

Does it affect your credit score?#

Simply being a guarantor won't. As long as the borrower keeps up with rent or loan repayments, you aren't affected at all.

The risk sits mainly with bank loans. On a rental contract, your agreement is just between you and the landlord. If the renter doesn't pay you legally owe the landlord — but they may not tell any credit reference agency, so your credit score may not be affected.

There are two ways it can reach your credit report.

1. If the borrower defaults on a loan#

If they stop repaying, responsibility falls to you — that's exactly why lenders ask for guarantors.

But if you can't cover the missed payments either, the borrower defaults, and that affects both of you.

Any default is recorded on your credit report as well as theirs, which can seriously affect your own ability to borrow in future.

This doesn't apply to a couple of late payments, which would be recorded on the borrower's report only. It reaches you when they can't pay at all and you've been officially told it's your responsibility.

2. You enter a financial relationship with the borrower#

By legally agreeing to act as a guarantor, credit reference agencies may see you as financially associated with the borrower — though not always.

A financial association is the technical term for anyone you share a financial agreement or product with — a joint credit card with a partner, a mortgage with a family member. You may also be considered financially associated with the person you're a guarantor for.

That matters because associations appear on your credit report. Anyone considering lending to you may check your associates' credit to build a full picture.

Say you share a credit card with your partner and they go bankrupt. Lenders may assume you'd help pay their debts, affecting your ability to pay your own — and decline you as a result.

When you become a guarantor, the borrower's name may appear on your credit record, so a lender could run a check on that name. If the borrower has bad credit, or might in future, think carefully about being associated with them.

Again, unlikely on a rental agreement. Landlords don't typically tell credit reference agencies you're acting as guarantor, so no association is created.

What happens if your score is affected#

Most importantly, you may struggle to take out a loan or mortgage yourself. Lenders check your credit report when deciding, and a default or a problematic financial association can make them reluctant to lend at all.

Three ways to protect yourself#

1. Only become a guarantor if you genuinely trust the borrower. Worth asking yourself:

  • Do you trust them? Usually people only do this for close friends or family.
  • Do you know how they manage money? Are you confident they can stick to the payments on their current income? Are they careful with spending? Can they budget? If you don't know, you may not be close enough to be their guarantor.
  • Could you repay the loan if they can't? Lenders check your affordability, but think it through yourself. If covering their payments would strain your own finances, it may not be wise.

Once you've entered a guarantor agreement, you can't back out, because the loan itself often depends on your involvement.

2. Pay on time, if you have to. Your score is only affected if neither of you can repay. Make the repayment on time and there's no negative impact.

3. Ask for the financial association to be removed. Once the borrower has repaid, your association is technically over, and you can ask the credit reference agencies to remove it.

Worth doing if they have a low score and you want to apply for credit yourself. You can follow this guide, or contact the agencies directly.

The key things to remember#

  • Being a guarantor alone has no effect on your credit score.
  • The risk crystallises only if the borrower defaults and you can't cover it.
  • A default is recorded on your report as well as theirs.
  • You may become financially associated, meaning lenders can check their credit too.
  • Rental guarantees usually aren't reported to the agencies at all.
  • You cannot withdraw once the agreement is signed.
  • Remove the financial association once the debt is repaid.