Will the people I live with be affected by my debt?

If you are struggling with debt and live with your partner or in a shared house, it is important to understand how your debts might affect the other people around you. We investigate the implications of your debt for family and friends.

The first thing to understand is that if you find yourself in a position where you are unable to pay your debt others who are living with you cannot be held responsible. Even if you are married your partner can not be made to pay debts that you owe.

In fact there are only two ways someone else can have responsibility for your debt. The first is if you borrowed the money in joint names. In this case, the other person is jointly liable for the repayment of the debt. The second is if a third party has given a guarantee to pay debt on your behalf if you default.

Will the credit rating of the people I live with be affected?

If you start to miss your debt repayments it is likely that your creditors will issue default notices against you. A default notice is a formal statement that you have broken the terms of your credit agreement. It warns other creditors who might be considering lending you money that you should be viewed as a higher risk.

Default notices will be issued even if you take action to manage your debts and implement a solution such as a Debt Management Plan (DMP). The record of any default notice issued will be listed on your credit file.

Problems can occur because the credit reference agencies often make errors by mixing up the credit records of people living at the same address. This can happen even if those living in the same property have different names. As such, if a default notice is issued against you it is possible that a record of this debt and default will also be recorded on the credit file of a housemate.

BMD Tip: The fact that this mistake has happened will not have any immediate effect on the people you live with. If they have ongoing credit agreements such as credit cards, personal loans or car finance, these will be unaffected.

The issue comes however, if they want to apply for a new credit agreement. For example, if someone you live with wants to take out a new mobile phone contract or apply for a new credit card, the provider will carry out a credit check. If your records are recorded on their file, this may cause their application to be rejected.

How to resolve credit file errors

It is actually very simple to resolve the issue of credit file errors. If an individual living with you has been rejected for credit or better still before they apply for credit they should review their credit file. This is easy to do by simply requesting a copy of their file from one of the three credit reference agencies (Experian, Equifax or CallCredit).

If there are any third party records recorded in error on the file, these can be taken off – a process known as disassociation. Once this process has been completed, any new credit application should no longer be held up due to the issue of credit file errors.

Of course, by going through this process, the other people living with you will become aware of your debt problem.

When considering how your debts will affect others living in the same house, the bottom line is that no one can become liable for paying your debt unless they were joint account holders from the beginning or gave a personal guarantee.

However, it is possible for credit file records to become mixed. For this reason it may not be possible to keep your debt problem from the other people living with you if they are likely to want to apply for new credit agreements.