It can be difficult enough to build up a decent credit score on your own, so the fact that others could harm your chances of being approved for a personal loan or credit card could be disheartening.
However, crucially, it also works the other way round. Your chances of being approved for a loan can be improved by making a joint application with someone who has a great credit score
The myths and truths of how and when other people affect your credit file and your credit score are unveiled below.
Financial associations
A financial association is another individual that you share finances with. A joint county court judgement (CCJ) can also create a financial association. Your current financial associations are visible on your credit file, which is held by credit reference agencies (CRAs) like Experian, Equifax or TransUnion (formerly Callcredit).
While your financial associations’ credit scores should not directly affect your own, prospective lenders may choose to take financial associations into account when considering your individual applications for credit. In this way, their credit score could have an indirect effect on your credit score. Additionally, when you hold a joint financial product but the other person uses it irresponsibly (perhaps going into unauthorised overdraft on a joint account or defaulting on a joint loan repayment), both your credit scores will take a hit.
Why would a prospective lender be interested in the credit scores of your financial associations? Well, they may worry that you might bail out your spouse, relative or business partner at the expense of your own financial obligations.
When you cut financial ties with somebody, the financial association on your credit file should be removed. If it isn’t, you can contact the credit reference agency with proof that you’re no longer financially connected to them and request that the association is removed.
Because a financial association can have a bearing on the outcome of your own applications for credit, you should think carefully before getting a joint account, applying for a loan in joint names or acting as a guarantor for somebody.
Do the people I live with affect my credit score?
Your credit file will only show a financial association to somebody you live with if you jointly hold a financial product. For example, if you have a joint bank account that you use to pay household bills or if you apply for a joint loan to cover a larger household expense.
If you apply for a financial product jointly with a housemate, both your credit files will be taken into account, and if the application is successful, a financial association will be added to your credit file. Until your financial ties with this person are cut, their credit score can have a bearing on future applications for credit, whether joint or individual.
If you don’t have a financial association to them, the credit scores of those living in your house won’t affect your ability to get a loan at all.
Does my spouse affect my credit score?
Marrying your sweetheart will only have a bearing on your credit file if you take out a financial product together. Chances are, if you’re tying the knot, you either already have an account or mortgage in both your names or you’re thinking of getting one.
When you apply for a financial product together, the would-be lender will consider both your credit histories. Once you hold a financial product jointly, a financial association will be visible on your credit file. That means that prospective lenders may consider both your and your partner’s credit scores – even if you’re applying on your own – until all financial ties are cut.
Bear in mind that if you’re thinking of applying for a loan together, but one of you has bad credit, the other might stand a better chance by applying on their own.
Finder survey: Do you know your partner's credit score?
Response
% of respondents
Yes
25.00%
No
37.50%
N/A
37.50%
Source: Finder survey by Finder of Finder members
Should I get a joint account/loan if the other person has poor credit?
If the other person has a poor credit score, you might be more likely to be approved for a loan if you apply for the loan on your own.
If you do enter into a joint financial product, bear in mind that the other party’s lousy credit score might get worse and could harm future applications until your financial association ends.
You’ll be held jointly liable for joint debts, so if the other person decides to stop making repayments, the lender is within their rights to chase you for the outstanding balance.
When you consider this, there’s realistically not a lot in it for you! Applying for a joint bank account might still make sense for convenience reasons, although you’ll need to be comfortable with the fact you’ll be jointly responsible for any debts run up on these accounts.
Tips for people considering a joint financial product
Do
Check each of your credit scores before deciding whether to make a joint application.
Ensure both of you meet the lender’s minimum eligibility criteria.
Make all repayments on time to ensure both of your credit scores improve.
Don’t
Apply for joint credit with someone you can’t trust.
John and Megan applied for a joint bank account together after moving in together. They were approved for the account but ran into trouble after John's compulsive shopping habit caused them to regularly fall into an unauthorised overdraft. This ruined their credit scores to the point where Megan couldn't get approved for a credit card. They decided to pay off the overdraft for the sake of their future creditworthiness.
* This is a fictional, but realistic, example.
Bottom line
The only people that can affect your credit record are those you hold a financial product with. Until financial ties between the pair of you are cut, their credit history may have a bearing on your own applications for credit products.
Frequently asked questions
There are 3 different types of joint loans.
Full partners. You each have full access to the funds inside them.
Authorised user. Authorised users can spend money on the account, but have no liability to pay the debts.
Co-signer. Co-signers are responsible for paying debt, but can’t spend the money on an account. This individual is also referred to as a guarantor.
You’ll both still have full access to the funds in the account as well as any overdraft facilities. You’ll have to agree jointly to close the account. If you’re married, the courts might have a say in who gets the money or who has to pay the rest of a loan. If not, you’ll have to work it out yourself.
Only if the other account holder and the lender agree. Often, a meeting between all 3 parties is necessary to facilitate this.
Currently in the UK, there is no such thing as a joint credit card. Although there may be multiple “cardholders”, only one individual is responsible for the debt.
Adding additional cardholders does not create a financial association between the cardholders, but if an additional cardholder spends a fortune and the account holder can’t pay it back, it’ll be the account holder whose credit score takes the hit.
Read about how different factors can affect your score
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Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more.
Learn the facts about loan applications and your credit score plus what you can do to minimise the impact.
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