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What Can Affect Your Credit Rating

21 February 2019 - Posted by TalkAboutDebt

Worried about your credit rating? If your partner is in debt or just recovered from their debt, their credit rating in theory should not affect you. This article explains in detail what factors can affect your credit rating and how to ensure your partner’s low credit rating does not affect you.

 

Will my relative’s low credit rating affect me?

 

A credit rating is based on the history of your debts, how they have been paid, records of any late payments or court orders for recovery of your debt. If you do not have any joint liabilities there should not be any link between your credit file and another person’s credit rating. Your debts, and how you have managed them, will not show on anyone else’s credit reference agency file unless you establish some joint liability.

 

If they owe money to various organisations then there is always a risk that collections or enforcement agents will visit the house that they live at, your house. This would be to establish whether they can recover payment or to seize their goods, they do not have the right to take your items as you do not liable for the debt. Also if you are applying for a mortgage in the future then it may ask for some of your details as part of the application process but you would need to speak to a mortgage adviser to see how this may affect a future application.

 

The same goes for previous property owners or tenants. If for example, a previous tenant had a poor credit rating, as long as you have no financial links with the previous tenants their credit rating should not affect your ability to get credit. Where an address has had a series of tenants with ‘bad credit’ or abandoned utility accounts, the utility suppliers may ask for a deposit or to install a prepayment meter where they are unsure of the new tenants’ identity.

 

Will my low credit rating affect the address I live at?

 

If you are on the voters roll or if you give any of your creditors your new address, you may show as living at your friends address for the purposes of a credit check. If this happens, or if you apply for credit using your friend’s address, you may appear on their credit report because of a practice known as linking. This is when credit reference agencies presume people living at the same address are financially linked, although normally it occurs when people share the same surname or have joint credit together.

 

If this does happen, then it’s easy and free to solve. Your friend just has to get a notice of association form from the credit reference agencies website and return it to them complete stating they have no financial association with you. The credit reference agency should then disassociate you from them. It may, however, never happen if there is no reason to associate you together in the first place.

 

Please note, another person’s debt cannot affect your personal credit rating. If you get letters from creditors, the best thing you can do is simply return any letters you receive. You can mark them with ‘Return to sender, no longer at this address’.

 

Can I remortgage my property with low credit?

 

Although it may be more difficult for you to remortgage given your credit history, it should not be impossible. You should speak to an Independent Financial Adviser who will be able to assist you further.

 

How will an IVA affect my credit rating?

 

You are able to apply for credit at any time, now that your IVA has finished. However, your application may be unsuccessful because the IVA will still show on your credit record and will do so for six years.

 

Chances are that your credit rating is already poor and because an IVA goes on your credit file it will be affected. An IVA will stay on your credit file for 6 years which is one year after the IVA would be due for completion.

 

How will a debt management plan (DMP) affect my credit rating?

 

By having a DMP your credit rating will be severely affected and you will find it hard to get any credit for the foreseeable future. A bad credit history stays on your credit record for 6 years after it is satisfied. It will therefore depend on the individual policy of the companies you apply to, as to whether you are successful in your application or not during those 6 years.

 

What is a notice of disassociation?

 

If you are in a position where a friend or family members finances may be affecting your own because you have been linked by association by the credit reference agencies, then you should do something about it as soon as you can. The process of separating your finances from someone else’s is referred to as Notice of Disassociation.

Common reasons to be associated are:

  • The bank accounts are in joint names and so are entries onto a credit file. Association of bank accounts can even happen after a divorce or separation
  • Shared surnames with the same address or postcode can also cause an issue, even if the information is a few years old

The two stages to ensuring you get a Notice of Disassociation:

  1. Stage 1: Find out whether there is an issue by contacting the credit reference agencies and getting a copy of your file.
  2. Stage 2: If there is an issue, write a letter explaining that your finance is separate, and nothing is shared between you. Provide evidence where you can e.g. letter from the bank or mortgage company.

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