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Your credit score is a very important part of your financial weaponry, and yet many people don’t give it the thought and attention that it deserves.

At the end of the day, your credit score will determine how much lending you have access to and the interest rates you’ll pay.

To give you an idea of how important your credit score is, consider this: Barclays bank, ranked as the 25th largest company in the world, has announced that it’s currently rejecting around half of all applications to its Barclaycard, one the UK’s most popular credit card.

Additionally, they’ve begun winding back the credit limits of around 500,000 current Barclaycard customers.

Do you want to be one of those applicants whose file sits smugly in the approved pile? If so, you’ll need to keep your credit score in tip-top shape. And the quickest way to soil your credit rating is to lend it out to someone else, by acting as a guarantor on his or her loan or credit card.

Guaranteeing a debt for someone else has an effect on your credit report, because you’re essentially taking on responsibility for the account. Regardless of whether they repay the loan in full or they default on repayments, the loan will show up on your credit report just like any of your other accounts.

When you co-sign to guarantee someone else’s loan, you’re agreeing to be responsible for paying back that debt in the event that the primary borrower defaults on their payments. Therefore, if you decide to go ahead and guarantee a friend or family member’s loan, it’s important to understand that it truly could go either way.

On the positive side, if that person pays off the loan in a timely manner, this will reflect well on your credit report. That particular account will be documented as having a blemish-free, on-time payment history, which will help you to demonstrate your financial responsibility.

On the negative side, however, if that person fails to repay the loan, or they’re consistently late with their payments, this will have a negative impact on your credit score.

When you co-sign, you are agreeing to be 100% responsible for the debt, even if you didn’t receive any of the funds or any of the benefits. If you don’t take over the payments in the event of a default, it will result in a mark against your credit score – and the debtor will also then be in a position to recover the debt from you, if necessary by suing you for repayment of the loan.

From there, you could end up with a court judgment against your credit report, a garnish on your wages, or at the absolute worst end of the scale, bankruptcy. It’s worth seriously asking yourself: is it worth the risk?

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