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Guarantor on a Commercial Loan to a Corporation

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Question: 
Is it permissible to report negative credit, to a credit bureau, on an individual that is a guarantor on a commercial loan to a corporation? If it is permissible, does the sword cut both ways? In other words, would you also have to report positive credit on all other commercial lines for that individual?
Answer: 

Well, I don't know definitively about "permissible" or not, but let's think about this logically for a moment (a dangerous thought, I know). The guarantor's obligation only comes into play if the corporation defaults on the loan. So, if the corporation defaults and the guarantor makes good on the loan guarantee, what negative information would be applicable to the guarantor? Same thing with positive information. Assuming the corporation is making its payments on time, the guarantor would not even be part of the transaction, so there is nothing to report applicable to the guarantor. This leaves us with only reporting negative information on the guarantor if he/she fails to live up to the guarantee agreement. That's what makes sense to me logically.

First published on BankersOnline.com 2/27/06

First published on 02/27/2006

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