Your credit score is more important than ever. It affects your ability to take out mortgages, loans, bank accounts and monthly credit agreements such as mobile phone contracts and car insurance. Yet, only about 20% of people understand how a low credit score can impact their finances. And it’s not just your own spending you need to consider. Your partner’s financial credibility can affect your credit score too.
What is a Credit Score?
A credit score is calculated based on your credit history. In simple terms, your credit score is based on how well you have managed your finances in the past.
Banks, building societies and other financial lenders use your credit score to determine how trustworthy you would be if they lend you money. Once they calculate how likely it is that you will make agreed repayments, they decide whether you qualify for a financial service such as a credit card, mortgage, loan or mobile phone contract.
Do You and Your Partner have Joint Credit?
If you have any joint credit agreements with your partner, their financial credibility can affect your credit score. This can be any joint financial service such as a joint bank account, a mortgage, a loan or a credit agreement for a new household item.
You do not need to worry about any costs you share such as car maintenance or household bills. Simply paying your share does not create a financial link between you.
You have Joint Credit. How Does that Affect Your Score?
Don’t panic if you have joint credit with your partner, as it’s not necessarily a bad thing. If they have a good credit history and manage their money well, it may have a positive impact on your credit score.
On the other hand, if they have a history of borrowing money and missing repayments or have a lot of debt, this may show up on your credit file. In this case, lenders may be more likely to turn you down due to the financial link.
How do I Improve my Partner’s Financial Management?
If your partner is currently struggling to control their finances, it may be worth simplifying their existing debts so they are easier to manage. If they have several debts with various lenders, they may benefit from a consolidation loan. This transfers multiple debts into a single place, making it much easier to manage.
It is also worth setting up a budgeting plan for them. You can do this in various ways. For example, if you do have a joint bank account, set up a standing order which only puts in a set amount of money each month. They will be forced to stick to this limit and won’t be able to overspend. Also, avoid having an overdraft on the account as they will have the ability to lend money that they may struggle to pay back.