Many people do not have a good credit record and are looking or ways to improve it. There are things that you can do and you might consider that taking out a guarantor loan might be a way to help. It is worth making sure that you know what a credit record is and how it works, what a guarantor works and then you can decide whether it is the right thing for you to try in order to improve your credit record.
What is a credit record?
A credit record is simply information about your credit worthiness. It will contain all sorts of information about your personal finances. For example, it will have details of the loans that you have as well as the regular payments that you make. This will include things like contracts for mobile phones, utility bills and even rent payments. It will therefore have details of any payments that you may have missed. It will also have salary details.
A potential lender will look at this information and use it to judge whether they feel they would trust you in repaying money that they lent to you. For example, if you have got a small loan and you are repaying it and you are managing to repay all your bills as well, then they are likely to lend to you if they feel that you salary is high enough to cope. However, if you have missed repayments on loans and are self-employed with a variable salary then they may decide that it is risky to lend to you. If you have had no loans before and do not make regular payments then they will not be able to judge how you might cope with a loan.
What is a guarantor loan?
A guarantor loan is available for those people with a poor credit record that cannot borrow large sums of money elsewhere. The loans are given to anyone even with a poor credit record as long as they can provide a guarantor who is a person who has a good credit record that will be willing to cover any loan repayments that cannot be met by the borrower. It can be a useful way to borrow larger sums of money, especially if you do have a poor credit record or are worried that you might not be able to afford all of the repayments on the loan. You will need to think about who to use for a guarantor as you will need to find someone that will be willing to help you out, can afford the repayments and has a good credit record. IT is most likely that this would nee dto be a family member.
Will a guarantor loan help my credit record?
It is often thought that if you can take out a loan and then prove that you can make the repayments, it will mean that you improve your credit record and you will therefore be more able to borrow money in the future. However, it is worth noting that all lenders have different criteria when they are looking at your credit record. It is sometimes thought that everyone has a credit score and that if they improve that they will be able to borrow more. However, this is not the case, lenders will just have a look at your finance history and use their own criteria for determining whether they will lend to you. It is not always possible to find out what these are either. It is even the case that some will like it if you have missed a few loan repayments as they will hope that you will do this when you borrow form them and they will make more money form you in charges. Whether or not this is true though is difficult to say.
Using any loan to try to improve your credit record is always a risk. If you happen to not be able to make a repayment on the loan, then it will have the opposite effect and make your credit record worse. Even if you have a guarantor covering those repayments it will still show up as you not paying and so it will work against you. A way to ensure this des not happen is to have an arrangement with the guarantor that they give money to you if you know you will be short when a repayment is due and then you pay it. Then it will look like you have managed all of the repayments and this will work in your favour. This could be complicated to set up though and you would need to be happy to ask your guarantor for money when you needed it and they would need to be able to provide it really quickly for you.