Ready to tie the financial knot? Take a look at how it could affect your credit – for better or worse – before you commit.
If you’re looking to take your finances to the next step, getting joint credit could be a handy way of splitting bills and combining living costs with another person. As with any financial commitment, though, it’s important to do your homework before you take the plunge.
What counts as ‘joint finance’?
Let’s begin by taking a look at which products actually fall under ‘joint finance’. If you take out a joint loan, a joint bank account with an overdraft, or a joint mortgage with anybody, you’ll be financially ‘linked’ to that person. In this blog, we’ll call that person your ‘financial association’.
What doesn’t link you financially, then? You won’t be financially linked to anyone if you share a joint credit card or shared utilities.
Now that’s out of the way, we’ll take a look at how your financial association could affect your credit report…
Joint finances and your credit report
1) It won’t affect your credit score
Yep, you heard us correctly! Your credit score isn’t affected by any financial associations.
It’s a common myth that your score will take a dip if your financial association has a less-than-ideal credit score – but credit scores don’t even come into the equation. Whether your financial partner’s score is sky-high or shockingly low, it won’t affect that three-figure score of yours.
However, financial associations can affect how lenders view you. If a lender conducts a hard search on you, they could see your financial associations on your credit report. And if your financial association has a poor credit background, lenders might worry you’re not totally reliable – even if your application has nothing to do with your association.
So, while financial associations don’t affect your score, they will appear on your report – which leads us to our next point…
2) It might affect your ability to get credit
As we mentioned before, having an association with poor credit on your report could lead lenders to believe you’re unreliable. And in some cases, this could mean you’ll get rejected for certain products, like a loan or a credit card.
It’s not all doom and gloom, though – if you’re linked to a financial association with a positive credit background, it could boost your eligibility for credit!
3) They can remain on your report for 6 years
Information on your credit report tends to stick around for up to six years. So, if you’ve taken out a joint loan, mortgage or bank account with anyone, their name could stick on your report for the foreseeable future – even after the joint product has been closed down.
4) You can unlink from people to improve your credit
If you’re reading this feeling concerned about any financial associations you might have, then worry no more. If you’ve cut ties with someone or if you’re worried your partner’s negative credit is dragging you down, you can remove associations from your report.
Simply contact the credit reference agencies and ask them for a ‘notice of disassociation’. In plain English, this just means asking them to remove this person from your credit report – a financial divorce, if you will.
Bear in mind though, they can only remove your association when they can see you’ve closed down the joint product. After this, their credit background won’t be taken into account when lenders look at your report.
Things to consider before you commit…
If you’re still with us and think joining your finances is the right step for you, it could be worth following these top tips before you sign the dotted line…
- Make sure you both check your credit reports before you apply
You don’t want any nasty surprises, so make sure you’re both happy to go ahead and borrow together after you’ve checked your credit reports.
- Have a frank discussion before you sign up
When you sign up for joint credit, you’re both agreeing to what’s known as ‘joint and several liability’. This means you’re both individually responsible for the whole debt – so if your partner can’t afford the payments, you’ll have to cough up the total sum. That’s why it’s important to have a conversation about your spending before you commit.
In this blog, we reveal what really affects a credit card application…
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