One of the biggest credit misconceptions out there is the impact other people have on your credit score. It’s commonly thought that living with someone who has bad credit, or living in a property where the previous residents had run up a lot of debt, can make your own credit score worse by association. Fortunately, both of these are myths. Usually, when you need a loan, lenders only take the circumstances of others into account if you’re financially associated with them.
What is a financial association?
You become financially associated with someone when you share a joint financial account with them. Some of the things that count as a financial association are:
- A joint bank or building society account
- An application for a loan that you’ve made together
- A joint credit card
- A CCJ that you are both named on
- A joint mortgage
Simply sharing an address doesn’t count as a financial association. Nor does being named with others on your household accounts like electricity and gas, or even tenancy agreements. In fact, as long as you keep your finances completely separate, it’s possible to be related, or even married to someone, without becoming financial associates.
How does a financial association impact your credit score?
Being financially associated with someone doesn’t affect your credit score as such. This is a number personal to you, your circumstances, and the type of loan you’re applying for. However, a financial associate can impact your ability to be approved for loans. Lenders may look at both your own circumstances, and those of people you are financially associated with when assessing your applications. Even if you apply on your own, they do this to work out whether or not the other person will affect your ability to meet your repayments, for better, or for worse.
Can a financial association be removed?
It’s only possible to remove a financial association from your credit report if it is there incorrectly. That is, if you are no longer, or never have been, financially associated with the person or people named. It isn’t possible to remove a financial association just because you think an individual is negatively impacting your ability to get a loan, as much as you might like to!
If you believe a financial association being shown on your credit report is incorrect, you should contact the both Credit Reference Agency who provided the report and the bank or financial institution that the account listed is with for assistance.
Ready to bust some more jargon? Check out more of our Money Savvy articles to get your head around all things money.
What are your stories about financial associations? Let us know in the comments!
