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Last Updated: Wednesday, 2 February 2005, 11:10 GMT
Marred by poor credit histories?
Jill Stevens
Director of Consumer Affairs, Experian

Jill Stevens of Experian
Thousands of people have found it hard to borrow money because they live with someone who has a poor credit history - a credit expert explains how new rules could change this.

In the past, your chances of getting credit could have been affected by the financial activities of members of your household.

If you lived with parents, children, brothers or sisters, how they managed their debts could affect your chances of getting credit.

Not all lenders used this information, but some did and this meant that you could be refused credit because a family member had a County Court Judgment or had defaulted on a loan.

If your former partner has a poor credit history, or is highly indebted, it could stop you getting credit or could mean you pay higher interest
Jill Stevens

Concerns about privacy and the implementation of the Data Protection Act 1998 paved the way for a new agreement between the credit industry and the Information Commissioner.

This came into effect at the end of 2004.

New rules

Now, when you apply for credit, lenders see information about the people you live with only if you are financially linked to them, for example, if you have a joint account or if you have ever made a joint application for credit.

If you are not connected to members of your household in this way, then their details are not seen by lenders when they assess any credit applications you make.

This also means that their credit histories are no longer stored on your credit report.

In the past, people were often upset to find details of their family's credit accounts on their credit report - and vice versa. That no longer happens.

Credit reference agencies, the organisations which hold the information which makes up your credit report, now simply list the names of people who are financially linked to you but offer no other details.

These changes are designed to better protect your privacy while enabling lenders to continue to take account of information relevant to your creditworthiness.

Joint application

Lenders can always dig deeper into the credit histories of people you are linked to and you could still be refused credit because of information held on their record.

If your information is taken into account when your partner applies for credit, your credit report will note that a "financial associate search" has been made. The same note will be made on your partner's report if you apply for credit.

Some lenders allow you to apply for credit independently of people you are linked to financially.

But you will have to declare that these people do not have adverse information on their credit reports and lenders will make background checks to verify this.

Financial split

Problems can arise when a relationship ends.

Your credit reports will remain linked unless you tell the credit reference agencies that this link needs to be broken.

If you do nothing, you may find that lenders take account of your former partner's credit history when you apply for credit in the future.

If your former partner has a poor credit history, or is heavily in debt, it could stop you getting credit or could mean you pay higher interest.

Experian produces a set of free advice guides about credit and credit reports, available from 0870 241 4297
Information Commission: 01625 545 745 (Data Protection Helpline); 01625 545 700 (general)
Experian: 0870 2416212 (helpline)
Credit Industry Fraud Avoidance Scheme (Cifas): 0870 010 2091

Breaking these links is not always simple. For example, one person might have to sign the mortgage over to the other. Or they might have to pay off one loan and apply for a new one.

In general, the credit reference agencies can only break the link once there are no longer any joint financial arrangements.

If your credit report wrongly shows a financial link to someone else, ask the credit reference agency to remove it.

They will create a "disassociation" and will let the other agencies know so you don't have to contact all three.

You can also add a statement (called a notice of correction) to your credit report to add further background information which might help lenders when doing a credit check on you.

If your partner has adverse information on their credit report, you could use this statement to distance yourself from this information.

You might want to do this, for example, if you feel the adverse history is nothing to do with you, perhaps because it relates to before you lived together as a couple or to things that have happened since you split.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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