How the splits could really hurt you

Posted in 'Personal Finance' by Richard Catlin

08 January 2009

The combined stresses of the festive period and over-stretched finances are set to be responsible for a record-busting number of divorces in January.

Whilst the New Year period traditionally represents the annual high in the number of divorce cases, 2009 is likely to eclipse previous years due to the added pressures of personal finances in the current economic climate. A recent survey found that 17% of divorced men blame financial pressures for the breakdown of their marriage.

The knock-on effect of this increase is also likely to result in record numbers of people having to check their credit reports to ensure that any financial association created whilst in a relationship doesn’t remain in place longer than it should.

Financial associations aren’t restricted simply to married couples of course – it only takes a joint bank account with a partner to create one. You are even ‘financially associated’ automatically if you share the same surname and live in the same household. Association information is recorded with the UK’s three credit reference agencies, and will be visible to lenders whenever they check your file, when you apply for a credit card, loan or mortgage.

A financial association doesn’t end automatically when the relationship dies. It needs to be removed, as otherwise the financial association will mean that both parties will be assessed for credit on their combined credit history. If one partner has a bad credit rating, this will continue to affect their ex-partners ability to get credit, and cause them to have to pay a higher rate of interest where lenders ‘rate for risk’. Very often, the first someone discovers this is when they are unexpectedly declined credit.

Thankfully, as long as the financial association has indeed officially ended – then a ‘financial disassociation’ is a fairly quick and easy process.

You can make sure that your own credit file is as it should be, and that you have no unwanted financial associations by checking your report online with checkmyfile when you base your report on Equifax data – or for even better value, all three agencies.

If you need any advice, our qualified credit analysts are only a free phone call or message away, and can help you lodge the required notice with the credit reference agencies to remove the association.

View your credit report online here