If you want to take out a mortgage, loan, credit card or sign up for a mobile phone contract, does your partner’s bad credit rating affect yours? If he or she has a bad credit rating, will you get turned down for credit?
Does your partner’s bad credit rating affect yours?
In many cases, your partner’s credit rating won’t affect yours. Your credit files aren’t linked when you start living with someone. They’re also not automatically linked or when you get married or form a civil partnership. However, if you have a joint mortgage, a joint bank account with an overdraft facility, you have joint names on a utility bill or you have a joint loan with your partner or spouse, your credit rating will affect each other’s.
SAVVY TIP: In the UK, you can’t have a joint credit card. If you have an account where there’s more than one credit card, one person will have taken out the credit agreement and will be responsible for the payments. So this wouldn’t create a link between your credit files.
Applying for joint credit with your partner
If you and your partner/husband/wife have taken out a joint loan or joint mortgage and you apply for credit together, the lender would look at both of your credit files. It would also carry out a credit score of each of you. This is a measure of how good or bad a risk it thinks you are. Once it’s taken both of your credit files and credit scores into account, it will decide whether or not to give you credit.
Applying for credit in your own name
It may seem surprising that your partner’s credit rating could affect yours if you apply for credit in your own name. I get a number of emails from women who have been turned down for credit because of a problem with their partner’s credit rating. Why is this? Lenders say that if you have joint credit agreements with your partner and they don’t have a good credit rating, it could affect the amount of money you have available to pay your own credit agreements.
The reason for this is that with any joint loan, utility bill or mortgage, each of you is legally responsible for ALL the debt or ALL the payments you are contracted to make. So, if your partner can’t keep up his or her share of the payments, you would be legally obliged to make them. For this reason, companies say that they may take your partner’s credit rating into account if you apply for credit in your own name.
IMPORTANT: As I mentioned at the start, your partner’s credit rating will only affect yours if you have joint loans or mortgages with them. If you each keep your finances completely separate, your credit rating won’t affect your partner’s. It also won’t affect your partner if you only have joint savings accounts (where you can’t go overdrawn).
How your credit files are linked
If you and your partner have a joint mortgage or joint loan, it will show up on your credit report.
- Look for a heading called ‘financial associations’ or ‘financial connections’.
- Any names that appear under that heading should only be people you have a joint mortgage, joint bank account, joint utility contract or joint loan with. If anyone else appears as a financial connection or association, I’d query it.
- That financial association will remain as long as you have joint loans or credit – even if you and your ex get divorced.
There are four credit reference agencies: Crediva, Equifax, Experian, and TransUnion. TransUnion used to be called Callcredit and it offers a free to use consumer score and file service called Noddle. The credit reference agencies each have their own scoring systems and will tell you your credit score. They are usually free to use, apart from Equifax. If you use Equifax, you get the first 30 days free, and then pay £7.95 per month. There are other companies, such as ClearScore, which repackages credit reference agency data (in ClearScore’s case it’s Equifax’s).
Full Disclosure: I write an editorially independent newsletter for Noddle, who pay me to do so. But Noddle do not pay me to publicise or advertise them.
If you have a complaint about your credit file that isn’t resolved, you can contact the Information Commissioner who deals with complaints about data, including credit file information.
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