Can an ex's debt problems affect your credit rating?
"I RECENTLY split up with someone who had quite bad debt problems, we lived together and had a joint current account. Could this affect my credit score?"
Credit reports are linked to individuals rather than to addresses.
However, what counts in the eyes of banks and potential lenders is whether couples who have parted ways continue to be financially linked.
Being financially linked
A shared bank account, credit card, mortgage or other financial product links two individuals in the eyes of credit reference agencies.
Where this is the case some lenders will search both the file of the applicant and that of the person they are linked to.
This could potentially pose a problem when the linked individual has bad debts or other past problems recorded by the reference agency (missed payments, for example).
Joint current accounts count
People often think that current accounts don't make a difference to credit reports but this isn't true: lenders increasingly take them into account.
Most current accounts in the market can be used as joint accounts and how a shared current account was used may have an affect on credit worthiness. For example, many reference agencies record whether the account was often overdrawn.
Banks also share details of current accounts' overdraft balances, overdraft limits and the status of the account.
According to May 2010 research carried out by Tesco, the majority of couples (56%) still prefer to maintain a degree of financial independence by not pooling all of their resources.
According to the same research, 47% share a savings account with their partner but just 34% are willing to share credit cards and only 30% are willing to share a life insurance policy.
However, as we've noted above, sharing any one of these products can lead to a couple becoming financially linked.
Improving credit worthiness
Luckily, being financially linked is an issue which can be resolved fairly easily: closing joint accounts means that potential lenders will only search the file of the individual applying for credit.
Those keen to make an application could check their credit file before going ahead and inform them if the information is still unchanged.
Notices of correction and dissociation
In some cases, however, it won't be possible to remove the financial link with a former partner. For example, when:
- Closed accounts are still listed on a credit file.
- The parties have a joint mortgage but don't live together and don't have any other financial associations.
- Both parties still live at the same address and the joint account isn't closed.
In the first two cases, it is possible to ask the credit reference agencies to unlink (or disassociate) the two people that are financially linked or, in the case of a mortgage, to post a Notice of Dissociation on the credit file.
A Notice of Dissociation or Notice of Correction lets potential lenders know about that the two parties are no longer together.
To apply for such a notice, the person has to prove that they have no active financial connection with the other person.
Application forms for notices from the three big reference agencies can be found as follows:
Note, however, that a correction is unlikely to be suitable for the third example above, unless there are extenuating circumstances.
As our longer guide makes clear, many aspects of creditworthiness relate to stability.
Signing up to the electoral roll, being employed by the same company, living at the same address and being with the same bank for a long time are all helpful.
The flip side of that is that moving out of a property can make applicants for credit a less attractive proposition.
Lenders use the electoral roll to check the names and addresses of people applying for credit so calling to confirm that an ex partner no longer lives at the address will help to prevent them from applying for credit using the old address.
Many people find that obtaining a copy of their credit report helps to ensure that they're getting a full picture of their finances. Mistakes are sometimes made by the credit reference agencies that are easily rectified.
There are three credit agencies to check scores with. Check our guide to accessing credit reports for more on how to do it.
As a rule of thumb, it's worth checking every year and a half or before any major credit application.
Liability for a partner's debt
Finally, it's worth noting that unless a credit agreement was jointly entered into, those in or out of a relationship should not be liable for their current or former partner's debts.
However, this is not the case where both halves of a couple entered into a contract.
For example, if a mortgage is in two names and one party cannot or refuses to pay, action will be taken against both parties.
Note that there's also liability if a partner is or was an additional credit cardholder: in this case the primary cardholder is liable for the whole debt, even if it was run up solely by the additional cardholder.
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