Credit Score Basics > How much does a joint account affect credit rating?

How much does a joint account affect credit rating?

Wollit Team4 minute read · Updated 1st July 2024

In the UK, having a joint account can affect your and your partner’s credit rating. When you open a joint account with someone, you create a financial link between you two

When you share an account with someone else, you both become responsible. If one of you has a bad credit score, it can make it harder for the other person to get credit. Lenders will look at your credit histories when you apply for credit together. If the joint account is not managed well, like if you spend more than you have or miss payments, it can hurt both your credit scores.

So, it’s essential to think carefully about how a joint account could impact your credit rating before you decide to open one.

What is a joint account?

A joint account is a bank or savings account shared between two or more people. It is commonly used by couples, family members, or business partners to manage household expenses, joint investments, or business operations. In other words, you can have a joint account with anyone—it’s not just between spouses.

What’s important is that all account holders have equal access to the funds and are equally responsible for managing the account. If the account is a credit account (like a credit card), this means that all the account holders are responsible for the debt as well.

Why do joint accounts affect credit rating?

Joint accounts affect credit scores because of something called “financial association.” When you open a joint account, you become financially linked to the other account holder (or holders).

This means that lenders also take both applicants' credit history and financial behaviour into consideration when looking at their credit applications.

How does a “financial association” work?

In the UK, credit reference agencies (Experian, Equifax, and TransUnion) collect data and maintain credit reports for virtually everyone.

These reports have information like credit history, payment history, credit utilisation, and any outstanding debts. When you apply for credit, such as a loan, credit card, or mortgage, lenders will usually check your credit report to see how you’ve dealt with credit before.

The financial association created by a joint account means that the credit reference agencies will link your credit histories together. This can impact your credit rating in multiple ways.

First, here are some of the pros of joint accounts:

If the joint account is managed responsibly, with all account holders making payments on time and keeping the account within the agreed limits, everyone involved can benefit.
Also, if one account holder has a limited credit history or a lower credit score, the joint account can help them build their credit profile by piggybacking on the stronger credit history of the other account holder.

Joint accounts also have serious cons, though:

If one account holder has a history of late payments or going over the agreed credit limit on the joint account, this will affect all account holders. Lenders may then view the other account holders as higher-risk borrowers even if they have a solid personal credit history.
Also, if one account holder defaults or declares bankruptcy, this can hurt everyone's credit score, as they are all jointly liable for the account.

How do I remove a financial association?

You need to remember that once a financial association is created through a joint account, it can’t be easily removed.

Even if you close the joint account, the credit reference agencies may continue to link your credit history to the other account holders for several years. This can make it hard to rebuild your credit score by yourself if the other account holders have a poor credit rating.

To remove a financial association, here is what you need to do:

Identify the financial association: First, check your credit report from the major credit reference agencies (Experian, Equifax, TransUnion) to see which financial associations you have.
Close or transfer the joint account: Before you remove a financial association, you need to close the joint financial product (joint bank account, credit card, or mortgage). Sometimes, you might be able to transfer the account to an individual account.
Contact the credit reference agencies: Once the joint account is closed or transferred, you need to contact each credit reference agency individually and request the removal of the financial association. You’ll do this by completing a “Notice of Disassociation.”

The credit reference agencies will take it from here. They’ll check if the account is closed or transferred and then remove the link from your report. We suggest you follow up and confirm that it’s done. You can do this by checking your credit report and checking that the association is no longer there.

How can I make sure that a joint account won’t affect my credit rating?

Before opening a joint account, you must consider what can go wrong. Here are some tips:

Review the other account holders’ credit reports. You can ask them for a copy if needed.
Set clear expectations: What will the spending limit be? Who pays the bills? What happens if one of you misses a payment?
Check the account balance and statements every month. Set a reminder if needed. You’ll need to monitor it regularly to ensure it’s being managed responsibly.
Look into alternative options, like separate accounts and using a shared budgeting tool instead.
Don’t be shy about closing the account if you’re uncomfortable with it. Just because you opened a joint account with someone doesn’t mean you’re stuck in that relationship. Consider closing or transferring the account if you see signs that the other account holders are not able or willing to make payments on time.

Finally, if you are still concerned about the impact of a joint account on your credit rating, you should work on your own credit history. You can do this in a number of ways, from getting a credit-builder card or a credit-building app.

One such app is Wolit. Wollit works by reporting your monthly fixed-fee subscription as a loan repayment to the credit reference agencies. This gives you a chance to build your own credit history and improve your credit score without the fear of financial associations and without having to piggyback on someone else’s credit rating.