Having no credit history makes borrowing harder, but it does not make it impossible. This article explains how guarantor loans have worked for thin-file borrowers, why that market has shrunk, and what alternatives exist today.
This article is information only. It explains how guarantor loans and alternatives work in general terms. It is not personalised financial advice, and it cannot tell you whether any particular product is right for your situation.
What is the short answer?
Yes, it is possible to apply for a guarantor loan with no credit history, but the number of lenders offering this product has fallen sharply. The loan does not rely solely on your own credit record: it relies heavily on the creditworthiness of your guarantor. That is what makes it historically attractive to thin-file borrowers. However, the guarantor loan market has contracted considerably, so it is worth understanding both how these loans work and what other routes exist before applying.
What does "no credit history" actually mean?
In plain English, your credit history is the record of how you have managed borrowing in the past. It sits on your credit file, held by the three main UK credit reference agencies: Experian, Equifax, and TransUnion.
When you have never borrowed before, or have only recently arrived in the UK, or have been living abroad for several years, your credit file has very little on it. This is sometimes called a thin file.
A thin file is not the same as a bad credit file. You have not missed payments or defaulted. There is simply not enough information for a lender to assess how reliably you are likely to repay.
For many standard loan applications, a thin file leads to a decline. The lender cannot see enough evidence of past behaviour, so the application falls at the first check.
Why were guarantor loans historically used for thin-file borrowers?
A guarantor loan works differently from a standard personal loan. When you borrow, a second person (the guarantor) co-signs the agreement. If you miss payments, the lender can ask the guarantor to pay instead.
Because the lender has this second line of repayment, your own credit history matters less. What matters more is the guarantor's credit record and financial position. For a thin-file borrower, this opened a door that was otherwise closed.
For example, a young person starting their first job, or someone who has recently moved to the UK, might have a guarantor in a parent or close friend who has a long, stable credit history. The lender is essentially lending on the strength of that guarantor's record, while giving the borrower a chance to start building their own.
The important bit is that the guarantor takes on real legal responsibility. If the borrower does not keep up with repayments, the guarantor is expected to step in. This is not a formality: it is a binding financial commitment.
What happened to the guarantor loan market?
The UK guarantor loan market went through significant change in the late 2010s and early 2020s. Several lenders that were well known in this space stopped offering new loans or exited the market entirely, following regulatory scrutiny around affordability assessments and how borrowers and guarantors were treated.
The Financial Conduct Authority (FCA), which regulates consumer credit in the UK, requires lenders to check that borrowing is affordable for both the borrower and the guarantor. Where firms fell short of these standards, enforcement action followed.
The result is that the number of active guarantor loan providers is now much smaller than it was. This does not mean guarantor loans have disappeared, but it does mean your options are narrower, and it is worth checking that any lender you consider is FCA-authorised before proceeding.
What to check before applying for a guarantor loan
Before making a formal application, a few checks can save time and protect your credit file.
Check whether the lender offers a soft eligibility check. A soft search lets the lender assess your likely eligibility without leaving a visible mark on your credit file. A hard search, which is used in a full application, does leave a mark. Too many hard searches in a short period can make future applications harder.
Think carefully about your guarantor's position. Your guarantor needs to understand exactly what they are agreeing to. They are promising to cover your repayments if you cannot. It is worth having an honest conversation about this before they sign anything.
Compare the total cost, not just the monthly payment. Guarantor loans are often priced at higher interest rates than standard personal loans. A useful way to compare is to look at the representative APR and the total amount repayable, not just what you will pay each month.
Check the lender is FCA-authorised. You can confirm this using the FCA's Financial Services Register at fca.org.uk. Any firm offering regulated consumer credit in the UK must be on that register.
What are the alternatives if guarantor loans are not the right fit?
Because the guarantor loan market has contracted, it is worth knowing what other options may suit a thin-file borrower.
Credit unions. A credit union is a member-owned financial cooperative. Many credit unions in the UK offer small loans to members, and some take a more flexible approach to credit history, looking at your overall circumstances rather than just a credit score. MoneyHelper has a tool to help you find a credit union in your area.
Credit builder credit cards. These are cards designed for people with limited or no credit history. They typically have lower credit limits and higher interest rates than standard cards. The idea is to use the card lightly, for example for one small regular purchase, and repay the full balance each month. Over time, this builds a record of responsible borrowing on your file. The important bit: carrying a balance and paying interest defeats the purpose and adds cost.
Specialist lenders. Some lenders are authorised to assess applications using data beyond a traditional credit score, such as open banking data showing your regular income and outgoings. Experian's guidance notes that some lenders look at affordability indicators even when a credit file is thin.
Building your file before applying. Sometimes the most practical step is to put off borrowing for a short while and build a credit history first. Registering on the electoral roll, opening a bank account, and using a credit builder card responsibly are all ways to add data to a thin file.
FAQ
Can I get a guarantor loan if I have never borrowed before? Some lenders will consider you if you have a suitable guarantor, even with no credit history. Having someone with a solid credit record willing to back the loan is often the key factor. Approval is never certain and depends on the lender's individual checks.
What counts as a thin credit file? A thin file simply means your credit report has very little information on it. This happens when you are new to the UK, young and have not yet borrowed, or have been living abroad. Lenders find it hard to assess risk with limited data, which is why standard loan applications can be declined.
Are there alternatives to guarantor loans for people with no credit history? Yes. Credit unions, credit builder credit cards, and some specialist lenders assess applications differently. Building a thin file gradually, through a credit builder card used lightly and repaid in full each month, can open up more options over time.
Will applying for a guarantor loan affect my credit file? A full application usually involves a hard search, which leaves a mark on your credit file. It is worth checking whether a lender offers a soft eligibility check first, as that does not affect your file. Too many hard searches in a short period can make future applications harder.
Who can act as a guarantor? Most lenders ask for a guarantor who is a UK homeowner, aged 21 or over, with a good credit record and enough income to cover the repayments if needed. They cannot usually be financially linked to the borrower, and some lenders will not accept immediate family members.
What happened to the guarantor loan market in the UK? Several large guarantor lenders stopped trading or exited the market following regulatory scrutiny and affordability concerns. This significantly reduced the number of lenders offering this product. The sector has contracted and options are narrower than they were in previous years.
Where to read more
For more on how guarantor loans work in full, including how repayments are structured and what happens if either party runs into difficulty, see our Guarantor loans guide.
For younger borrowers exploring their options, the Loans for young people guide covers the wider picture.
MoneyHelper (moneyhelper.org.uk) provides free, impartial guidance on borrowing options and has a credit union finder. Experian's consumer guidance covers how credit files are built and what lenders typically look for.
Sources
- MoneyHelper, borrowing and credit guidance (moneyhelper.org.uk)
- Experian, how credit scores work and thin-file guidance (experian.co.uk)
- Financial Conduct Authority, consumer credit regulation and FCA register (fca.org.uk)
- Can I get a guarantor loan if I have never borrowed before?
Some lenders will consider you if you have a suitable guarantor, even with no credit history. Having someone with a solid credit record willing to back the loan is often the key factor. Approval is never certain and depends on the lender's individual checks.
- What counts as a thin credit file?
A thin file simply means your credit report has very little information on it. This happens when you are new to the UK, young and have not yet borrowed, or have been living abroad. Lenders find it hard to assess risk with limited data, which is why standard loan applications can be declined.
- Are there alternatives to guarantor loans for people with no credit history?
Yes. Credit unions, credit builder credit cards, and some specialist lenders assess applications differently. Building a thin file gradually, through a credit builder card used lightly and repaid in full each month, can open up more options over time.
- Will applying for a guarantor loan affect my credit file?
A full application usually involves a hard search, which leaves a mark on your credit file. It is worth checking whether a lender offers a soft eligibility check first, as that does not affect your file. Too many hard searches in a short period can make future applications harder.
- Who can act as a guarantor?
Most lenders ask for a guarantor who is a UK homeowner, aged 21 or over, with a good credit record and enough income to cover the repayments if needed. They cannot usually be financially linked to the borrower, and some lenders will not accept immediate family members.
- What happened to the guarantor loan market in the UK?
Several large guarantor lenders stopped trading or exited the market following regulatory scrutiny and affordability concerns. This significantly reduced the number of lenders offering this product. The sector has contracted and options are narrower than they were in previous years.