This answer doesn’t apply to Windows 10 version 1903+
Whenever I try to run the virtual machine it shows an error saying I have to disable credential guard.
You should indeed upgrade to a newer version of VMWare Workstation, however, I am aware this comes at a cost. The good news is there is a solution to your problem. I should add that VMWare Workstation 12 is fully supported on Windows 10, any incompatibility with newer versions of Windows 10, would only be an issue if you were trying to run them within your VM which isn't the case.
However, Credential Guard was already turned off.
Core Isolation is not considered Credential Guard. Your screenshot only indicates Core Isolation is disabled.
I did not find Device Guard option in Local Group Policy to disable it.
This is due to the fact you are using Windows 10 Home. The policy in question only on supported versions of Windows 10. The simplest solution to your problem is to use the Windows Defender Device Guard and Windows Defender Credential Guard hardware readiness tool, and then run the following command in an elevated command prompt.
DG_Readiness_Tool_v3.6.ps1 -Disable -AutoReboot
In addition to running the command, you should very the following registry keys do not exist. If you delete these keys you must perform a reboot.
Source: Manage Windows Defender Credential Guard