If you go bankrupt your credit rating will become worse. The fact that you are bankrupt is registered on your credit file and remains there for six years. During this time it will show up if a credit check is carried out against you. As such it is less likely that you will be offered credit by any lender.

However bankruptcy is a personal matter. Third parties cannot be involved and it will not affect the credit ratings of any other family member or friend who may be living with you. Their financial circumstances and ability to borrow will remain unchanged. Nevertheless there are some things that people living with you should be aware about.

Can people you live with ever be affected by your Bankruptcy?

Credit rating problems can occur for people who live at the same address as you after you have gone through the Bankruptcy process. This is even more likely if they are have the same surname as you.

The reason why this happens is because of what the credit reference agencies call financial association. This is where it is assumed that people who live at the same address are financially associated with one another. As a result they can mistakenly associate the credit file records of people who live in the same property.

The result is that a default notice or missed payment record could be recorded on an innocent third party’s credit file. This will then show up on any credit check carried out against them. If this happens they could find that they are refused credit.

How can people you live with resolve credit rating mistakes?

This situation is easily resolved. If anyone who lives with you is planning to apply for credit, or is simply worried about their credit rating they should first check their credit file for mistakes. The file is available from the main credit reference agencies Experian, Equifax and Callcredit.

If there are any entries on their file relating to your debts or payment problems they can ask to be disassociated from these. This will ensure that they do not get highlighted in any future credit checks.

BMD Tip: A family member or other person living with you may still be refused credit even after they have confirmed none of your debts or payment problems are recorded on their file. Where this is the case the refusal will have nothing to do with your bankruptcy.

If someone you live with believes they have been wrongly rejected for credit they should show a copy of their clean credit file to the lender in question. They then need to understand the other criteria the lender may have used to make their lending decision.