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How do other people’s debts affect me?

Posted 20 March 2015

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You might have a good credit score, but does your partner? Find out how to prevent your credit score being damaged by a current or ex-partner.

If your partner has debts, then you may be wondering whether this will affect your credit rating as well. The good news is, if you don’t share any financial products with them (e.g. a joint mortgage or joint bank account) then it shouldn’t have an impact, even if you live at the same address.

Financially linked

If you don’t currently share a financial product (e.g. loan, mortgage, bank account) with someone, but you have in the past, then you will probably be financially linked to them on your credit report … often for many years. This doesn’t just apply to current partners, it applies to anyone you’ve had a financial product with in the past, for example, any ex-partners, former housemates or anyone who acted as a guarantor for you. If you lived with them, but didn’t share a financial product, then their credit rating won’t impact on yours.

The best way of checking whether you are financially linked to someone is to check your credit report. There are three main credit reference agencies, Equifax, Experian and Callcredit, and lenders will look at the information they hold on you before approving you for credit.

If you have been financially linked to someone, but you’ve gone your separate ways, then you may be able to ask for a note of disassociation. This means that their credit history won’t be taken into account by lenders when you apply for credit.

Click here for more information on applying for a note of disassociation

Joint debts

It’s important to remember that joint debts are still joint debts, even if you no longer live together. So, you won’t be able to get a notice of disassociation until all your joint financial commitments have finished. You can, however, add a short note to your report, outlining to lenders why you are connected. You do this by contacting a credit reference agency and asking for a notice of correction.

Whatever type of joint debt you have, you will usually be liable to pay the whole amount, not just your half, if your ex-partner refuses to pay their share. That’s because most credit agreements specify that you are “jointly or severally liable” for borrowing that you take on with another person. This is why it’s important to let your bank or lender know that you have split up, as soon as possible. Once you have done this, they may be willing to reduce your payments to an affordable level and put a restriction on the account so that your ex-partner can’t run up additional debts without your knowledge.

You should be able to ask your bank or lender to separate the debt, but there is no guarantee that they will agree to do this. If they won’t, you will need to speak to your ex-partner and try to come to an arrangement on how you will both pay back what you owe. You may decide that you will keep making payments from a joint account until the debt is paid back. Or you could come to an arrangement where one person makes the payments to the bank or lender, and the other person sends them their share via standing order.

If your ex-partner refuses to cover their share of the debt from the offset or maybe stops making payments after a while, then don’t be afraid to tell your bank or lender. If you don’t think your bank or lender are treating you fairly then you can complain to the Financial Ombudsman Service.

Applying for a mortgage

If you have a good credit rating but want to apply for a mortgage with a partner with a bad credit score (or vice versa), then you may struggle to find a lender willing to give you a mortgage. You may wish to look into your partner’s credit history with them and see if there’s anything you can do to improve their score before you apply. Click here to find out how to go about this.

There are lenders who specialise in mortgages for people with bad credit scores, so you shouldn’t feel disheartened. These mortgages are often called ‘sub-prime’ or ‘adverse credit’ mortgages and you will typically need a deposit of at least 25% - 30% of the property’s value. Be aware that they will usually carry a higher interest rate than mortgages for people with good credit histories.

by Kyri Levendi

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.