Following on from our last blog post, we're going to explore when financial ties to housemates and family members could put your credit rating in jeopardy.
Although it hasn’t always been the case, credit checks are carried out on a person rather than an address. That’s why, in most cases, your credit history won’t be affected by the person you’re sharing a house with – unless of course, you’ve taken out credit or a bank account with them. The same is true of previous occupants of your address – even if they had a bad credit history it should not affect you.
On the other hand, there are a few exceptions. For example, if you are the account holder in charge of paying the bills – like electrics, water, gas or even just your cable TV or broadband – you could be in trouble if your housemate refuses to pay. Regardless of the disagreement, if you can’t pay the full amount on time, this will likely be marked against you on your credit history.
If your housemate is refusing to pay their share, it’s better to pay it on their behalf and then try to come to a resolution afterwards. Try speaking to them and explaining how serious the matter is. If they still refuse to cooperate, it might be worth speaking to your landlord.
For some bills, including your rent, your contract might be “joint and severally liable”. This means that should you fail to pay, anyone named in the contract can be held responsible. Again, in this case, if a housemate refuses to pay their share, it is better that you clear the balance before the deadline and try to resolve it once you’re in the clear. If they refuse to pay, you might consider sending them a letter warning them that you’re considering taking legal action through a Small Claims Court.
Your family member
If you receive debt collection letters through your letterbox that are addressed to a family member who used to live with you, for example one of your children that has now moved out, or even for other unrelated previous occupants, you shouldn’t have to worry about damage to your credit history. As your credit history isn’t attached to your address, you won’t be held responsible for their debts.
But if you do have concerns about the letters, apply for a copy of your credit history from one of the credit reference agencies for £2 and have a look at the section on financial associations. If the name of the family member you’re worried about isn’t there, you don’t need to worry. You can then choose to either forward the post on to your family member or return it to the creditor marked as ‘no longer at this address’. However, if the name does appear under your financial associations, their debts could affect your chances of getting credit. You should apply for a financial disassociation in this case.
Should you choose to be a guarantor for one of your family members – whether that be for a loan or a rental deposit – your credit histories won’t be tied. The only way your credit history will be affected is if your family member defaults on a payment. In this case, the default would be marked against you on your credit history, and you would be held responsible for paying the outstanding balance. If it remains unresolved, you could end up with a County Court Judgement (CCJ) against you. This is why it’s really important to make sure your friend or family member will be able to afford to keep up with the payments.
We hope we’ve answered all of your questions about whether or not someone else can affect your credit history, but if you do need any more information, we’re happy to help. You can get in touch with us via Facebook or Twitter.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.