Does a joint account affect your credit score?

If you've ever applied for a credit card, loan, or mortgage, you’ll know that your credit report and score are important factors that lenders look at when determining whether to give you the green light. But what happens when you have a joint account with someone else? Does that impact your personal credit score?

The short answer is – yes, a joint account could affect your credit score, both positively and negatively. Here’s how. 

Joint accounts and credit scores

First, let’s quickly cover how joint accounts and credit scores work:

• Defining joint accounts: A joint account is a bank account or financial account co-owned by two or more people (e.g., couples, housemates, business partners, or close family members). Typically, each account holder has equal rights and access to the account and can deposit, withdraw, or manage the funds within it.

• Understanding credit scores: Your credit score is a numerical measure of your credit health and your likelihood to be accepted for a credit application, like a credit card or mortgage. The score is formulated based on your borrowing and repayment history across loans, credit cards, mortgages, phone contracts, and other credit commitments.

  In the UK, the three major credit reference agencies (CRAs) are Experian, Equifax, and TransUnion. Each CRA calculates your score separately using its own methods and data.

  The details and history on your credit report have a major influence in determining your eligibility and desirability to lenders, and they may also influence the terms you’re offered on financial products. A higher score indicates that your report is likely to be perceived well by lenders, signalling that you manage your debt responsibly and are less likely to break your credit agreements (like defaulting). While the score itself isn’t used by lenders, it’s indicative of your credit health and whether your credit application is likely to be accepted.

Monitoring your report with each credit reference agency provides a comprehensive view of your overall credit health. At Checkmyfile, we make this easy by combining data from Experian, Equifax, and TransUnion into one easy-to-understand report. 

What happens when you take out a joint account with someone?

Sharing finances with someone, such as through a joint bank account or mortgage, links both parties together in the eyes of lenders. This is referred to as a financial link, connection, or association – which all mean the same thing in this context. The person you share the account with becomes a ‘financial association.’

An association is created when you:

• Open a joint bank account.

• Co-apply for credit – like a mortgage, loan, or credit card.

• If a County Court Judgement (CCJ) is issued to multiple people.

• Become/ or have a guarantor for a credit agreement.

These associations appear on your credit report. Even after closing down joint accounts, these links can remain indefinitely until you decide to remove them. If you look at your credit file, you might find old associations with past partners, spouses, or roommates listed there. 

It’s important to check your credit report and request to have any no longer relevant financial associations removed, to prevent these associations from influencing your likelihood of getting credit. 

How do joint accounts directly affect your credit score?

Joint account activity involving borrowing, lending, or overdrafts can be reported to the credit reference agencies and could affect the credit score of all named account holders. This includes when any of the following is taken in joint names:

• Joint accounts (with overdrafts).

• Personal loans.

• Car loans.

• Mortgages.

• Some bills, such as mobile phone contracts or utility bills.

Any form of credit activity on jointly held accounts can affect each party’s credit rating. That’s because joint accounts create a joint liability to manage the account. 

For example, a joint account that isn’t managed well and has missed/late payments could impact your and your financial associate’s credit scores. Or, suppose you take out a joint loan with someone but they don’t fulfil their half of the bargain in terms of repayments; any missed payments can affect your credit score negatively, and you’re jointly liable for the debt. 

Here’s another example: Suppose you have a joint account and overdraft with a housemate or partner. This account dips beyond the arranged overdraft limit, and no one pays it back on time. Any missed repayments and extra charges may then affect both parties’ credit scores, and the debt is the responsibility of both account holders.  

(Important note: on the other hand, careful management of a joint overdraft might actually improve your credit score because it can be seen as responsible use of credit.)

How do joint accounts indirectly affect your credit score?

We’ve established that credit activity on the joint account can directly affect the credit scores of all account holders. But can one person’s own individual financial affairs affect their financial associates’ credit score, or their ability to get credit?

First, it’s important to understand that your credit score is not directly affected by a financial associate’s own personal financial affairs. But your ability to get credit might be affected by a financial associate’s personal credit health. 

Here’s why: When you apply for credit, lenders will look at your credit report. They’ll check for any financial associations – and they’ll look at their credit reports too.  

If your financial association has debt and a record of making late payments, a lender might think there's a chance you'll need to cover shared debts and how that could affect your ability to manage your own money. If a lender believes you might struggle to support your financial associate and keep up with your own bills, they could turn down your application. 

Here’s an example: You are financially associated with someone who has a CCJ for missing debt repayments. While this won’t directly affect your credit score, lenders can see your associate’s CCJ when you apply for credit. This could influence their decision to approve your credit application. 

Removing outdated financial associations

It can be important for your credit health to monitor your financial connections. It could be beneficial to check them if: 

• You're moving, buying a home, or changing marital status.

• Someone close to you dies.

• You're separating from a partner.

• You're seeking credit.

• You're switching banks, phone companies, or utility providers.

If you no longer share accounts or are financially linked with an associate, you can request that the credit reference agencies remove them from your report by proving the tie is severed. 

Your Checkmyfile report displays financial associations from the UK’s three main credit reference agencies, making it easy to quickly identify potential outdated connections. 

Tips for managing joint accounts to maintain your credit score

Since credit activity on your joint account can directly affect your credit score, it’s important to be mindful of the way you manage it. Here are two steps you can consider to help make sure that a joint account is well managed – limiting any negative effects to your credit score: 

• Ensure clear communication and  rules for joint account usage. Effective management of a joint account begins with clear communication and ground rules. It’s beneficial for both parties to agree on what the account will be used for (e.g., household bills, savings for a holiday, or emergency funds), and some might choose to establish spending limits. You can also decide whether to include any conditions, such as requiring both parties’ approval for transactions over a certain amount.

• Actively monitor the account. Both parties can have access to the account's online banking or mobile app to keep track of all transactions, scheduled payments, and the account balance. This could help detect unauthorised transactions or errors that could affect your credit health. Setting up automatic alerts for low balances or large transactions can also help you manage the account.

Note: if a payment (like a subscription or bill) bounces on a joint account because not enough funds are available, it can affect the credit score of both named individuals because missing payments are considered a negative marker. This is another reason why it can be important to keep an eye on your balance and what’s going in and out of your joint account.

Debunking three joint account myths

Numerous myths are floating around about when and how joint accounts jointly affect those associated with them. We tackle some of these below:

• Myth #1: Opening a basic joint banking account (like a current account) will merge your credit scores with the other holder. Fact: While joint credit accounts get reported on both individual credit reports, the actual scores remain entirely separate. The scores reflect each person's entire history, not just that shared account.

• Myth #2: Your new joint banking partner's existing debts suddenly become your responsibility too. Fact: After establishing the shared account, you only become accountable for debt opened jointly in both names. Your joint banking partner’s previous debts stay independent.

• Myth #3: Marriage means forming a financial association and taking responsibility for each other’s debts. Fact: Legally, you’re not responsible for a spouse’s individual debts unless you co-signed, or the debts are in your name too. Marriage doesn’t create a financial association but joint accounts or credit applications will create a financial link with your partner. 

Key takeaways

Joint accounts can be a practical way to share and jointly manage finances with another party. However, it’s important to weigh the pros and cons, because how your joint account is managed can positively or negatively affect your credit score. And, importantly, any debt incurred on a joint account will be the responsibility of both parties. This is why it can be beneficial to closely monitor your joint account and credit report over time.