Do you and your partner talk about your finances? Money is often the biggest taboo for a lot of couples, but it is vital to discuss and know about your partner’s financial situation.
A recent survey found that 1 in 7 people in the UK hide their debt from their partner. This statistic is particularly worrying for couples planning a joint future together, which involves taking out a joint mortgage, loan or even credit card.
This blog will provide you with all you need to know about how debt, relationships, and how your partner’s debts will affect you.
Debt and relationships
What happens to your (or their) debt and credit score when you get married?
It is commonly believed that when you get married, your credit score will link up with your partner’s creating a “joint” credit file. This is not true. Your credit scores are linked with your social security number, therefore remained tied only to you.
Similarly, if you or your partner changes their last name once married, this will not affect either of your credit files. If a partner changes their last name, their credit history is not deleted and they do not have to start again under the different name. The only difference is that the new last name will be added to the file as an alias.
However, this does not mean that your partner cannot hurt your credit score and vice versa. If your spouse continues to make late payments after you open a joint account, this could negatively impact your credit score. On the other hand, if you both can keep that joint account in good standing, it could be helpful to improving both your credit scores.
When you borrow money or enter into a financial agreement with someone else, such as your partner, you take out a joint debt. There are different types of joint debts including loans, credit agreements and bank accounts.
Although marriage alone is not enough to link you and your partner’s credit files, joint credit applications will make an association between you and your partner.
While a joint account can be great for couples who have a solid financial history, if you or your partner has a history of defaults it can affect the other’s file. Even if your joint accounts are up to date and you have no current issues with debt, when you create a joint account your partner becomes a financial associate and will be named as one on your credit file. Creditors can then look up your partner and their history could affect any future credit applications you apply for.
If you or your partner have a weak credit history it might be advised that you keep your finances separate for now, and work on rebuilding your individual credit score.
When you take out a joint debt, you and your partner both become responsible for the debt – the full amount, not just “your share” or half. If one of you cannot pay, you are both liable for the full debt no matter who has spent the money. This is what is known as “joint and several liability”.
Be careful of credit card debt! Unlike other joint agreements there is no such thing as a joint credit card. You can choose to add additional cardholders to your account who can spend on their own card. But it is only the account holder who is responsible for repaying the debt.
Am I liable for my partner’s debts?
Being liable for your partner’s debts depends on whether the borrowing is in joint names or just your partner’s name alone. If the debt is in their sole name you cannot be held liable unless you have acted as guarantor when the loan was taken out.
However, you can be held responsible for debts that are in your name or held jointly in your name. If you have a shared credit card or bank account with an overdraft you should regularly check the balance.
If you and your partner are jointly liable for debts then that doesn’t mean you owe just half the money. Your creditors can demand that you repay the full amount if they cannot get in touch with the other account holder.
If you are struggling with debt, either alone or with your partner, then there is no better time to receive informed debt advice.
Contact us at talk about debt on 0808 156 7730 for unbiased debt advice.