How do other people’s debts affect me?

posted by in Living with 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.

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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.

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Tags Living with 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

  • Brenda Sear

    Hello, we hope you can give us some advice – we stayed for 3 weeks with my sister and her husband before we moved out to France in 2014. My sister has just told me that she and her husband cannot change their mortgage as there is a debt lodged against the property in my husband’s name, and that this is obviously affecting their credit rating. We’ve been looking into this, and have discovered that these days credit files are individual and not linked to an address, also that there would only be a problem if we had a joint financial arrangement with them such as a joint account, which we don’t. My husband has sent off for his credit file report but it will take days for a pin number to be sent to my sister. In the meantime we want to tell them that we are not to blame for the fact that they cant get credit – is that correct? Also, how could my husband’s name turn up on my sister’s husband’s credit file to start with?
    Many thanks for any information you can give us.

    • moneyaware

      Hello Brenda

      Thanks for your comment.

      Yes, you are right, credit files are individual and not based on addresses, so even if your husband took out credit using their address details before you moved to France, it should not affect their ability to renew their mortgage.

      You’re doing the right thing by getting a copy of your husband’s credit file, check this and see what debts are showing up on his file. Your sister and husband should also do the same – there may perhaps be a debt that they’ve forgotten about, or a mistake on one of their credit files which is causing the issue.

      I hope that it gets cleared up for you.

      Thanks
      Becca

      • Brenda Sear

        Hi and many thanks for your helpful reply. We are still a bit stumped as to how my husband’s debt could appear on my sister’s husband’s credit file. Today we’ve discovered that the debt is due to an unpaid credit card – we rang the CC company who say they used sis’s address because they couldn’t register our French address when we gave them this. Yet we didn’t give my sister’s husband’s address to anyone at all, so how could they know it? It doesn’t make sense!

      • moneyaware

        Hello Brenda

        I’m glad to hear that you have uncovered what’s happened, you should now ask for it to be removed from your sister’s husbands credit file. Write to the credit referencing agency to request this, they will then confirm with the lender that there was an error and remove it from your sister’s husbands file.

        Thanks
        Becca

  • Robert

    Apologies but this might be wrong. You can have bad credit at a shared address if the people with bad credit use the general address of the house and you do as well and if you are both silly with the addresses sometimes, or because a form will not allow you to specify a flat number for some reason.

    For example say your building address (house converted into separate flats, in this instance) was 4 bad credit street. Now you live in ground floor flat of number 4 and your neighbour lives at flat 2.

    Now, sometimes you and the neighbour do not use the flat numbers before the address when signing up to things so for example you just put “4 bad credit street” instead of putting “ground floor flat” or “flat 2” before the address.

    What this does is it makes the systems now think you are both living at the same address, even though you live in different flats. So when you apply for something you can be told “due to bad credit of somebody at the address you provided, we cannot process your order” and then be told you have to send in further proof of you living there or send the company a deposit.

    So please be very careful especially in former houses converted to always put your flat number BEFORE the rest of your address when signing up, and make sure the neighbours do as well. Otherwise the systems will think that the place you are living at is just one house and that you and neighbour have the exact same address… and their bad credit WILL affect yours, or the other way around.

    I have had this happen when trying to sign up for broadband, apply for the job I have now and even to reactivate my post office account.

    • moneyaware

      Hi Robert,

      Thanks for your comment.

      Because your credit history is based on your personal details, not your address, it’s unlikely that if a person at the same address you (but a different flat) who has poor credit could affect your ability to get credit. Similarly, living with someone who has a poor credit doesn’t affect your credit history, unless you have a financial connection, like a joint bank account.

      However, errors can occur on credit files as the system isn’t perfect. Debts can occasionally be attributed to you which aren’t yours making it difficult to get credit. This may have happened to you. I’d recommend you get a copy of your credit report and check it for anything that looks wrong. If any debts have be wrongly placed on your file, you can complain and have them removed and the records updated.

      I hope this helps,

      Becca

  • Marilyn@StHelens

    If I paid off someone’s debt (this relative does not live with me and has not lived with me for 30 years – the debt incurred was nothing to do with me and not at my address) does it affect my credit rating if I have my name down as paying off the IVA for her? I have been advised to seek legal advice before offering to settle the debt but I am not in a position to pay for a solicitor as well!

    • moneyaware

      Hi Marilyn,

      Thanks for posting.

      Without knowing all the specific details it’s hard to say for sure, but I can’t see any reason why your credit file would be affected. If you have no connection to these debts and you’re simply providing the money to settle the debts then it wouldn’t be reported onto your credit file.

      However, if you’re being asked to sign anything before making this payment it would be worth inspecting the wording very carefully to make sure there’s nothing suspicious.

      Kind regards

      James

  • Sharelle Wolstenholme

    Hi ive got 2 payments til my iva is over… a year ago my partner moved in with me.. we added this on my iva… but ive now found out he is in 25000 pound of dept… getting a loan of 3500 3 months ago… ive resently just lost my job… i have said about him getting an iva or dmp.. can he under the same address as me while i have my last 2 payments? X

  • Rob Davis

    Hi. I hope that this thread is still active. I have a very low credit score due to various issues in the past that are now resolved. My Father who has had a perfect credit history has been a guarantor on a couple of loans which have always been paid on time but it looks like this link with me is now affecting his own credit score, which to me does not seem right or fair when all he has done is help me. How can I make sure that the credit agencies are not punishing him and affecting his credit score. Thanks.

    • moneyaware

      Hi Rob

      Thanks for your comment.

      You may need to do some further investigation to find out what’s going on here. Because he is your guarantor on a couple of loans it could be that in the eyes of the CRA’s you now have a financial connection, but that should only be on the accounts you paid and it’s difficult to see how if payments were made on time – how this might negatively affect his rating.

      We suggest that your father (and perhaps yourself too) gets records from all of the CRA’s to get a full picture of what’s going on, and then take it from there. This article gives you both a step by step to follow to get your reports:

      https://moneyaware.co.uk/2017/05/how-to-get-your-credit-report/

      I hope this helps!

      Thanks,
      Becca

  • Ruby

    Hi. My husband is on a DMP with StepChange. We ended all financial connections in 2016 and I have written to all three credit agencies to ensure that we are no longer financially connected. I now want to buy a house and get a mortgage as a sole applicant, however the mortgage broker I am using has said that even though we are not linked on credit facilities, a lender may end up getting my husband’s details through credit linked searches at our current address which will impact their decision. Is this correct that they can search my husband even though he is not applying? I am confused because having read the comments below, I thought the credit was linked to a person not the address. Very many thanks in advance for a reply

    • moneyaware

      Hi Ruby

      Thanks for your comment.

      There may be information on a report about people who the person has no financial connection with or no longer shares a financial connection with (e.g. parent or ex-partner).

      In this case you should write to the agency to ‘disassociate’ themselves from you, explaining the reasons, and complete a form giving details of the people they want removed from the report.

      However, if you have already done this then the next step is to ask the Information Commissioner for help, you can contact them at: https://ico.org.uk/concerns/

      I hope that this helps.
      Thanks
      Becca

  • Craig Robinson

    Hi, my mum keeps ringing me telling me a debt of mine that’s showing up as an unsecured loan keeps re-attaching itself to her house affecting her ability to remortgage her house. The bank account was opened 9 yrs ago at my mums address, it closed 18months ago due to failing to pay back my overdraft i also had a credit card that i defaulted on and they started debt proceedings, Ive not lived there in 5yrs had three addresses since and the credit card wasn’t opened at her address either surely they cant keep attaching a link to my mum affecting her credit when i don’t live there Ive updated the address after the accounts closed so the debt follows me but it isnt