According to the credit ratings agency Experian, one in six people have had their loan prospects harmed as a result of someone else’s credit report. The research revealed that a partner – or ex partner – who has a bad credit history could have a serious impact when it comes to applying for credit. From former spouses through to university housemates, there are many people who come into – and out of – your life who have the potential to make getting credit more difficult.
Who could adversely affect your ability to get credit?
Anyone with whom you have shared a credit account in the past. For many people that’s an ex partner or spouse but it could also be a housemate or a sibling.
How does someone else’s credit score affect your own?
If you have formerly shared the responsibility for some credit with someone then you will continue to share a link when it comes to credit information too. Joint financial activity will mean that your credit file becomes associated with that of another person. As a result, when you make an application for a loan/credit, the lender will have the option to look at your credit history and also at the credit report of the person you have become associated with.
Does your credit file contain their credit information?
No. When a lender makes a search of the credit file they will see only the information that relates to that particular person. However, there will also be a note that indicates there is another credit file connected to this one. So, a lender can also go and retrieve the financial information of the associated file. If it’s information that flags up a potential risk to the lender (for example, missed debt repayments) then there could be some hesitation when it comes to lending to the original applicant.
Experian research also found that one in three people now rate being good with money above good looks when it comes to finding a potential partner. This focus on financial dexterity is a sensible place to start when it comes to avoiding a situation where your credit history is being adversely affected by a partner or an ex partner. But there’s also a lot more that you can do, including:
Have a frank conversation about cash. The earlier you do this, the better for the relationship and for your own financial future. Establishing financial compatibility can not only help to avoid a negative credit situation in future but could be the key to working towards a relationship that helps you reach your own money goals.
Make sure you know exactly how and when your credit report could become linked to that of another person. Everything, from applying for a mortgage with a partner through to setting up a joint account with a sibling you’re sharing a home with could create financial association. If you’re not sure whether that’s going to be the case then ask before you sign anything.
Swap your credit scores. It may seem like pretty personal information but honesty is the basis to any good relationship and secrets tend to cause issues, especially when it comes to money. So, swap your credit scores early on so you can see whether this person is a good match for you financially or whether there is something in their credit history that means there could be a potential problem in future.
Act quickly when a relationship breaks down. Although it can be an emotional time it’s important to protect yourself financially. For example, you will need to start monitoring transactions closely in any shared accounts to ensure that payments aren’t being made or cash withdrawn without your knowledge. It is also a good idea to settle any outstanding joint debts that you have as quickly as you can, where possible so that there are no remaining ties.
Break your financial connections ASAP. You can apply to each credit agency for an official notice of disassociation that will cut the financial tie between you and whoever else you may have once shared a credit account with. This will ensure that, in the eyes of any lender you make an application to, your credit report is not linked to anyone else’s.
Having a different credit rating to your partner doesn’t have to mean the end of the world for your relationship. It’s important to be honest and open about where you are financially to lay the foundations for making things work. And, if things come to an end, to ensure that you can both go your separate ways unencumbered.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley