When you’re applying for credit – whether that’s a loan, mortgage or something else – the lender will typically look at your credit score before deciding whether to accept your application. Essentially, a credit score is a three digit number that indicates your trustworthiness as a borrower. The higher this number is, the lower the risk you are.
In this guide, we take a look at whether your partner’s debt or low score impacts your credit rating and vice versa.
Will my credit score affect my partner?
Put simply, no. Your credit score is based on your individual financial history. The three main credit reference agencies – Experian, Equifax and TransUnion – put these scores together by collecting data from your credit history, public records and current credit agreements. Your score could be affected by missed payments but can also be impacted if you’ve never used credit, as there’s no evidence to show you’ll reliably repay.
As this score is calculated solely from your personal financial history, it won’t impact your partner’s score unless you are financially linked. This applies to any type of relationship, from casual to long term marriage. In fact, your marital status isn’t even recorded on your credit report.
However, if you are in a committed long-term relationship or marriage, it’s a good idea to discuss your financial histories, as you may be considering a joint bank account or mortgage.
Do joint accounts affect credit score?
Once you take out joint credit with your partner or spouse, such as a loan or mortgage, this will link you financially. The person you take out credit with will become your financial associate, appearing on your credit report. This means that companies may check their credit history when choosing to approve your credit application and consider you a higher risk by association.
The impact on your credit score can be positive if you both make payments on time and stay within the credit limit of your joint account. However, as you both are liable for the account, it’s essential to know if your partner has a bad credit history. If your partner is accumulating debt and has to declare Bankruptcy or take out an Individual Voluntary Arrangement (IVA) to pay back joint debt, this could reduce your credit score.
Although it might not be the easiest conversation, it’s a good idea to take a look at each other’s credit scores and financial histories before committing to a joint account. Being on the same page about each other’s finances will protect you from any negative impacts on your credit score in the long run.
Does changing your name affect your credit score?
Whether it’s because of marriage, a civil partnership or something else, you may be thinking about changing your name and worrying about the impact on your credit score. The good news is that it won’t. Personal information such as your name and date of birth are listed on your credit report but this is used simply to identify you. As mentioned above, getting married to someone else will only impact your credit score if you have a joint account.
It’s important to update your name if you do not change it though to avoid any incorrect information or inconsistencies on your credit report. You can do this by updating your legal documents, such as your passport or driving licence, and letting your creditors know of the name change.
What will happen if my partner and I break up?
If you and your partner didn’t have a joint account or any joint credit, there is nothing linking you financially so you don’t need to worry about the impact on your credit score if you do break up.
However, as discussed above, if you do have a joint account, you will have financial association with them even after separation. If you simply close the joint account, credit reference agencies may continue to link your credit history to the other account holder, potentially impacting on your ability to borrow in the future. To protect your credit score after a break up, you should get what’s known as a financial disassociation.
The first step in financial disassociation is to check your credit report with each credit reference agency to see what financial links you do have to your ex-partner. To remove these links, you should then close or transfer any joint accounts. You can then contact each credit reference agency individually to require the removal of the financial association through completing a ‘Notice of Disassociation’. The financial link will then be removed from your credit report.
If you or your partner are concerned about your credit score and are struggling with debt, you may want to consider a debt solution such as an IVA or Debt Management Plan (DMP). For more information, you can visit MoneyHelper for free advice or get in touch with us today.
