subject: No Credit History? Go Guarantor Loan [print this page] A credit history is a record of an individual's past borrowing and repayments, and includes information on arrears, defaults and bankruptcy. This information is used by loan lenders to determine the applicant's willingness to pay the debt. This is otherwise known as credit worthiness.
There are many reasons why an individual may not have a credit history, such as being too young, never having a bank account, or never accessing credit of any kind. Conversely, a history may be built up by acquiring different credit agreements, such as credit cards, loans or mobile phone contracts.
If a person has no credit history, today's lenders may see them as being high risk, simply because they have no way of knowing whether they will receive all of the repayments. For this reason, a lot of people with no credit history are finding it hard to obtain finance.
One product that is available to those with little or no credit history is a guarantor loan.
Guarantor Loans work on the basis that the applicant adds an additional homeowner onto their application. This person acts as the guarantor, and effectively guarantees that the loan will be repaid, in the event that the debtor fails to meet the repayments.
This then gives the guarantor extra security on their lending, and means that they are able to become more accommodating to those that may have been refused credit elsewhere.
By taking out a guarantor loan, many people have found that they can build, or repair their credit history, something they may have not been able to do previously. This could then lead to obtaining more credit, such as a mortgage, in the future.
In summary, if you have limited exposure to credit or have no credit in your name or associated with your credit file at all then a guarantor loan could be a good first step into borrowing.
