How Do Joint Finances Affect Your Credit Rating?

Having a personal connection with someone either because you are married, living under the same roof or have the same surname does not link your credit reports or affect your credit rating. However, if two or more people have formed a financial association then this can influence your credit report. This means they have entered into a financial product together, for example, a bank account or a mortgage. Borrowing with anyone else brings risks; there are advantages and disadvantages to borrowing with other people and can affect your credit score so consider any joint financial arrangements carefully.

A financial association on your credit report can last for many years even after the association has ended. Always be mindful of entering into any credit agreements where the other party may have poor credit because this could affect your own. Furthermore, just because a relationship has ended doesn’t mean the financial association has been severed. Couples who took out a mortgage or another jointly held loan may find themselves still linked financially, even if they are living apart and financially independent. Unravelling joint finances can be costly in term of time and money.

Joint borrowing commonly includes mortgages and bank accounts but can also include credit cards, utility contracts and even insurance products.

What happens if I have a different credit rating from my partner?

Your credit report will only contain your financial information; however, it will also show the name of anyone you have a financial association with.  If either party has a poor credit history it can adversely affect the other’s credit profile because there is a financial link between people. 

Sometimes a financial link with a partner is not always a bad thing. If you don’t have any credit history because you have never taken credit before and your partner has a strong credit history, this could help you while you build your own profile. However, if a partner or associate has evidence of missed payments, CCJs or bankruptcies creating a financial association could a bad idea.

If you’re concerned that your partner may have poor credit, it’s a good idea to check your credit report to see if and how you are financially linked.  By checking your own credit file you can see if you are financially linked or not and the steps you could take to improve your credit rating.

Drawbacks to a financial association

Many people fail to recognise that when a relationship fails there can be dire financial consequences. Before entering into a financial association you should consider what would happen to your finances if your relationship with your partner took a turn for the worse.

• Having a joint account means that your partner will have just as much access to the funds in that account as you do, whether you want them to or not. This puts your money at unnecessary risk, especially after a relationship breakup.
• Any joint credit agreement will state in the small print that you are jointly and severally liable for the debt. This means if you split up you are still both equally responsible for repaying that debt. If the other party fails to keep up their half of the repayments, you could be chased for the entire amount. This will be reflected on your credit score.

How to remove a financial association with your partner?

If you are no longer financially connected to a partner you can contact the credit agencies and ask for a ‘financial disassociation’ to be created in your file. This means that any link to that person will be permanently removed from your file and their spending behaviour will no longer impact your credit score.

To get a financial disassociation, you will need make a formal request with each of the major credit agencies. You will be asked to list addresses you shared and declare that you no longer share any financial ties. This includes bank accounts and joint credit agreements.

Once you are formally financially disassociated from your partner, your finances or credit score will no longer be affected by their actions in the future. You can request a statement of correction to be put in your credit file. This is a 200 word statement where you can explain any credit entry on it, for example a missed payment. Please bear in mind that if you add a Notice of Correction to your credit file, lenders searching the credit reference agencies database for information they hold about you are obliged under the Guide to Credit Scoring to read your Notice of Correction.

Disassociations are on the rise

Financial disassociation is not something all couples do routinely when they split up, as many are not aware that their credit files are linked to start with. Although the credit reference agencies have seen a steady increase in demand for financial disassociations, which is in line with a general increase in awareness of credit reports, the majority of people still do not check their report so links never severed