How do other people’s debts affect me?

posted by in Credit Files, Debt

If you're accepted for credit, it's down to you

If you’re accepted for credit, it’s down to you

Credit ratings appear to have such an elevated sense of importance these days. Whether it’s because you want to get a mortgage in the future or because you worry about what’s round the corner and want the ability to borrow if and when you need to.

So you’ve done your best to keep up to date with your credit repayments, and tried not to default in the hope that it will give you a pristine credit rating. But we all know that credit ratings are dependant on lots of different things and being accepted for credit is never guaranteed, especially in the current economic climate.

So how does it work?

If you are trying to increase your credit score, it’s important to try and understand what can and can’t affect you. And one question we get asked time and time again is:

  • How do other people’s debts affect me?

Other similar questions include:

  • I live with my mum and I think she might be behind on her credit cards. I don’t want to ask her but will it affect me?
  • I want my boyfriend to move in with me but I’m worried about my credit rating. Will his bad debt affect my rating?
  • My parents are in an IVA. Will I be able to get a mortgage?

And there’s the flip side too. You may not want your adverse credit history affecting your nearest and dearest. So what’s the deal, can they be affected?

The simple answer to all these questions is NO.

Previously, everyone under the same roof shared a credit history. You can imagine the problems this must have caused. Unruly previous tenants affecting your ability to get a phone contract or non-dependant children racking up bad debt under your roof!

Those days are long gone, there’s no such thing as a blacklist and each file should be based on the individual alone.

Are we connected?

Provided that you’re not financially associated in any way and you’ve never had any joint accounts or debts, your credit history will be entirely separate from anyone else’s, whether you live with them or not.

If you’re unsure whether you’re connected learn more about how joint loans can affect you. Remember that acting as a guarantor can also link you financially.

If you’re worried about your credit file, remember to put things into perspective. Credit rating is not the be all and end all.

If you or others are struggling with problem debt, it’s more important that you focus on that rather than its effects on your credit rating. All things considered it’s unlikely that you’ll be in a position to borrow any more until your existing debts are cleared.

You can read more about joint debts on our website.

If you or someone you know is struggling to get access to credit there could be an underlying debt problem. Get in touch with us to see how we can help.

Save

Pavan Gata-Aura is a qualified debt advisor with 6 years of experience. She enjoys spending time with her two children, fundraising for charities, has spent time volunteering in Africa and takes part in organised races.

Written by

Tags Credit Files Debt
  • peebles808

    Hi, my 81-year-old mother recently purchased a new car I know she can’t afford (she’s very low income and very little in savings). She didn’t tell me about the car until it was a done deal. I fear it will eventually be repossessed. I would’ve helped her find an affordable used car if/when she ever needed another (and had always intended to put a down payment on it for her), or just given her my old car, but she’s thrown a big monkey wrench in that more feasible plan.

    She got the loan at the dealership, and now wants to refinance. That’s probably a good idea, and she is a member of a credit union. But I’m also a joint member on her credit union bank account, just in case she ever needs me to take care of things if she’s too ill to (which fortunately hasn’t happened yet). However, if she gets a car loan from this credit union that she later defaults on (or if she defaults on the loan from any lender), will I in some way be held liable because we share a bank account? Will it hurt my credit, or will creditors come after me regarding her defaulted loan?

    • moneyaware

      Hi there,

      Thanks for posting.

      Firstly it’s important to understand the difference between the types of car loans and agreements, as each of these works differently and have different rules on whether a car can be repossessed or not.

      There’s some more information about the different types of agreements on our website here here:

      https://www.stepchange.org/debt-info/car-finance-debt.aspx

      With a joint bank account, you’re right to think that this would affect you both, as it would create ‘joint and several liability’ for any debts owed. If your mother couldn’t keep up with payments you’d be liable for the debt.

      There’s more information on joint debts and how this can affect you here:

      https://www.stepchange.org/debt-info/how-joint-debts-affect-me.aspx

      Sometimes there may be other options if you’re looking to be able to deal with your mothers accounts, but without also sharing liability for debts. You could look into getting power of attourney to act on her behalf, this is explained in more detail here:

      https://www.stepchange.org/debt-info/power-of-attorney-and-debt.aspx

      I hope this helps,

      Rory