The Three Alternatives To Joint Accounts
If you dont want a joint account, because it feels too soon or because of credit score worries, but you still want a way to share bills, most couples use some variation on these three approaches.
Split the bills
You decide who pays each bill, for example one of you pays the rent and the other pays the council tax and utility bills.
You can either aim for a 50/50 split or arrange it so the person earning more pays a larger share what matters is what feels fair to you both.
One of you get a bills account
If this account is just for regular bills that are going to be paid mostly by direct debit or standing order, one of you; usually the one with a better credit rating sets up a separate account for the regular bills and you both pay into that account when you get paid. Then the rent, council tax etc are all paid from that account.
The other person cant add a new bill or take money out, but if this is just for the big regular bills, that doesnt matter.
Managing everyday expenses such as food and petrol
Many couples also want to share most everyday expenses.
If one person has a good credit record, they could get a credit card and the other person could have a second card on the account. The account holder is totally liable for the whole debt, it wont show on the persons credit record at all.
But this risks running up debt unless you are both disciplined not to overspend.
This may sound perfect but look out for the charges on these cards as they can add up to a lot!
Or Get A Joint Account For The Bills
Here each of;you sets up a standing order to pay money into the joint bills account when you get paid. All the standing orders and direct debits for shared bills are all set to come out of the new account.
Some couples only do this for the big regular bills.
Others put all expenditure apart from some personal spending money through the joint account, so it becomes the normal account to use for at the supermarket, for petrol, the kids clothes etc. If you are getting child benefit or other;benefits, they could also be paid into this joint account.
Are You More Likely To Get Accepted For A Joint Loan
Yes, you are much more likely to succeed with a joint loan application because:
- Combined incomes are better than one: a collective income is going to be higher than a sole income and makes the lender feel assured that youre less likely to default on payments.
- If one borrower defaults the other has to pay: if one party to a joint loan stops paying, then the lender can look to the other party/ies to pay the whole amount due.
- Joint loans for couples with bad credit are easier to get: if one party has a bad credit rating and another has a good to excellent credit score, then the party with bad credit is much more likely to succeed in borrowing money jointly whereas they would struggle to get a loan solely.
If you have bad credit and are struggling to get a loan, you might be interested to read: Guarantor loans explained
Be Wary Of Joint Finances If One Of You Has A Poor Credit History
Living with, or being married to someone with a bad credit score wont affect yours.
However, as soon as you open a joint bank account or take out a mortgage together, your credit rating could be affected.
For example, you will be co-scored if you apply for credit. Its a good idea for both of you to check your credit rating before combining your finances.
Joint Loans: Here’s How It Affects Your Credit Score
Nothing is more troublesome than purchasing a house of your dreams or a car or when you have a big wedding coming up. It involves lots of hassles and money. For example a home loan is usually the biggest financial liability in an individual’s life, and thus needs to be carefully considered. Sometimes you may want to buy a house of greater value, but you may not be eligible for a huge amount of loan from the bank. This is where opting for a joint loan comes in handy.
Here are some pointers about what a joint loan is and how it can affect your credit report and score:
Why do I need to apply for a joint loan?
A joint loan is given to two or more borrowers. With more than one borrower, you have more income to pay the loan, and it may be easier to qualify for a large loan. Also, additional borrowers may have better credit history and more collateral to help you qualify. If you’re married or would like to go in for a joint loan with either of your parents / siblings, it proves to be a more convenient approach to managing your money together.
Responsibility of the co-applicant in a joint loan
Both the borrowers’ credit score is affected by a joint loan
With a fair understanding of the benefits of opting for a joint loan, given below are some Do’s and Don’ts one must consider before applying for a joint loan:
Do not default on monthly installments as it will have a negative impact on both borrowers’ credit history
How Joint Loans Can Affect Your Credit Score
- A joint loan will be recorded on your credit file and if the other borrower has a bad credit score, this unfavourable financial association could damage your credit rating and make future borrowing difficult or more costly with a higher rate of interest.
- If the other borrower defaults on repayments and you alone cannot solely afford to pay, then you could easily end up with a debt that spirals out of control and a default being recorded on your credit file. A default will severely damage your credit score and lending eligibility – lenders will consider you a .
- If you pay off the loan on time and in full, without ever missing a payment or paying late, then this should eventually have a positive impact on your credit rating which is very often initially lowered when you jointly apply with someone with bad credit.
- If you are a joint borrower with a poor credit rating, taking out a joint loan with someone who has a good credit history will help to boost your own credit status and should elevate your score.
Sharing Everything In A Joint Account
You can combine all your income into a single pot and use this for all your expenses from small, everyday things to paying the rent, mortgage and bills.
This can make budgeting a lot easier, but youll need a joint account for it to work smoothly.
That way, youll both have control over the money and youll both be able to see what the other person is spending.
Here are a few ways to make sure sharing everything works well for you:
- Make sure you have similar spending patterns, habits and behaviours otherwise youll disagree and start arguing about money.
- Agree a spending threshold between you if you want to pay for something more expensive than the threshold, youll both need to agree to avoid an argument.
Should We Be Linking Our Joint Finances
Combining finances is a practical way of managing money and expenses for people who live together. For couples, joint accounts mean transparency about who is spending what and can prevent arguments about money.
However, if one of you has a poor credit history then opening a joint account or creating a financial association means the other person will be co-scored, potentially lowering their credit score.
You could become liable for the other persons debt, and if one person takes money out of a joint account there arent many options for getting it back.
Are There Joint Credit Card Credit Scores
Credit scores are always based on an individual’s credit history, so even joint card holders will have different credit scores based on the credit accounts that they don’t share. While the payment history for a joint credit card will separately be reported to both joint account owners’ credit reports, there are no credit agencies that provide a joint credit card credit score.
Fixing Credit Report Errors
Credit reports are monitored by the three major credit bureaus under the authority of the Federal Trade Commission. Sometimes these bureaus report false information as a result of a clerical error, erroneous information from credit lenders, or even fraud. If there is an error on your credit report, there are several simple yet important steps you can take.
Will Changing Your Name Affect Your Credit
Changing your name after marriage wonât affect your credit. But you should inform your lenders of your new name. Theyâll report it to the three major credit bureaus: TransUnionÂ®, ExperianÂ® and EquifaxÂ®. It might take a month or even longer to show up, so donât panic if you donât see the change straight away.
Also Check: How To Get A Bankruptcy Off Your Credit Report
Theres No One Size Fits All Approach
You can use our free Budget planner to get an idea of how much money you and your partner have coming in and out.
How you manage your finances will depend on your attitudes to money.
You might find some areas where youre happy to share the responsibility, but others where you need to reach a compromise.
Before you get started, try to understand each others approach and attitude to money.
This will help you find areas where you agree and disagree so you can spot potential problems before they happen.
Savings And Your Credit History
Any savings accounts you open wonât affect your credit history. Thatâs because they donât report to â these are the companies that hold your credit report.
So if youâve got a lot of savings, lenders canât look at this when theyâre deciding whether or not to let you borrow. And if you open a joint saving account with your partner, this wonât show up on your credit history.
A joint savings account could make it easier for you and your partner to contribute to a common savings goal â if youâre putting money towards a housing deposit, a car or a new kitchen, for example. It also means you wonât need to worry if you or your partner has a bad credit history â a joint savings account wonât affect the otherâs credit.
Also Check: How To Get My Free Credit Score
Does Making A Family Trust Affect Your Credit Score
A joint bank account can be an advantage and a disadvantage when it comes to credit scoring. In some cases, a joint account will help to boost one person’s suffering credit, but in other cases, it could drag down one person’s otherwise solid credit. There also are differences between joint accounts. Joint bank accounts could mean checking and savings accounts or it could mean joint bank loan accounts. It is important to understand the consequences of each on your credit.
What Is A Joint Checking Account
A joint checking account is exactly what it sounds like: a checking account that belongs to more than one personin this case, a married couple. Either person can add money to the account, withdraw from it or use it to make purchases.
The type of joint accounts most married people open qualifies them as equal co-owners in the eyes of the law, which means each person is entitled to half the money regardless of how much they’ve contributed. At any time, either account holder can withdraw up to 100% of the funds and can close the account without the approval of the other party. If one spouse dies, the account may also stipulate survivorship rights that pass the balance of the account to the surviving account holder without going through probate. For these reasonsand many othersopening a joint checking account is an act of trust.
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What Does It Mean To Be An Authorized User
An authorized user is someone who has charging privileges on another persons credit card account. Most credit card companies allow cardholders to add authorized users as long as their account remains open and in good standing. For example, a parent could add her college-aged child to her account, or a husband could add his wife to his account. The credit card issuer does not check the authorized users credit.
When youre an authorized user, you can make purchases with the card but youre not responsible for paying the bill. The primary account holder is liable for all charges, regardless of who used their card to make them.
So how does being an authorized user affect your credit? Its pretty simple. When a friend, family member or significant other adds you to their account, it effectively transplants the payment history for that account onto your credit report. Once it shows up on your report, the information for that account is factored into your credit score calculation.
If the primary cardholder has a solid track record of paying on time, that will work in your favor. For FICO scores, payment history makes up 35% of the calculation. FICO scores also factor in the age of the accounts on your credit report so if the person whos granting you authorized user status has had the account for several years, that can also help.
Do Joint Accounts Affect My Credit During Foreclosure
When you apply for a joint mortgage loan with another individual generally your spouse the lender takes both of your incomes into consideration when processing your application. This allows you to qualify for a larger mortgage than you would if you applied on your own. As with any loan, however, joint mortgages come with risks. The person you share the loan with is just as responsible for making the payments as you are. Should the bank foreclose on the home at any point in the future, your credit scores and those of the joint account holder will suffer.
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You Can Inherit Others Credit Problems
My late husband was a terrible money manager. He was always late on payments and also opened credit cards that I was not even aware until his untimely death in 2011. My credit score is terrible because of this. He had a heart transplant on 2001 and shortly after that we had to file bankruptcy .
Generally, you are not responsible for the debts of relatives when they die. Exceptions include if you are a cosigner or joint account holder, or when your spouse dies and you live in a community property state.
If the person with whom you shared a joint account dies and there was a balance, however, then you inherit the full debt. This can create enormous problems if the income you normally counted on to pay those bills, such as your spouses paycheck or Social Security, stops. If you fall behind on the debt you inherited, your credit scores can drop.
Make sure you each have adequate life insurance, but think twice about , which are often expensive and may not cover all the bills the surviving spouse or joint account holder would have to pay.
Does A Joint Bank Account Affect Your Credit Score
If youre thinking of taking out a joint bank account, but you want to be 100% sure that your credit score won’t change or be negatively impacted, this guide will help.
Below, we answer eight of the most frequently Googled questions about joint bank accounts and credit scores, like does a joint savings account affect my credit score? or are joint bank accounts a good idea?
We also cover the following topics:
- Joint bank accounts for married or unmarried couples
- Opening a bank account with someone who has bad credit
- If you can improve your credit score by having a joint account
- Whether having too many accounts is bad for your credit rating
- The rules regarding opening a joint bank account with an elderly parent
Also Check: What Is A Good Credit Score For My Age
What Happens If You Open A Joint Bank Account And One Person Has Bad Credit
The disadvantages of a joint account are that if one party has bad credit, the other party is intrinsically linked to that bad credit through having a joint account with them . This could affect the other partys ability to get credit, despite the other party having a favourable credit rating.
Conversely, if you open a savings joint bank account, bad credit suffered by one party will not impact upon the other because unlike current accounts, savings accounts are not recorded on credit files.
I Have Credit Card Debt And A Student Loan Which Should I Repay First
Every financial situation is unique and there are no financial answers that will apply to all people at all times. However, in general, when you have several debts, its a good idea to focus on the debt that has the highest interest rate. In most cases, this will be credit card debt. Youll want to focus on this debt since it likely costs you the most each month. Continuing to carry credit card debt can get very expensive, so its a good idea to try to pay off your credit cards as quickly as you can.
Once your credit card debt has been repaid, youll want to focus on the student loan.
Remember, even though youre putting most of your efforts into paying off debt right now, its still a good idea to try and put something aside each month for emergencies. Even if you can only manage a few dollars a month, having an emergency fund will help you avoid debt troubles in the future.