Everything you need to know about your credit score and how it relates to your family

 

 

Although it is not the be all and end all of your credit future, understanding and monitoring your credit score is crucial if you want the best chance of being granted a loan. Quite simply, any lender can and probably will access your credit report before making a decision on your loan application. It is not the sole factor at play, but a very important part of the process nonetheless.

Fortunately, you can access your credit report too. There are 3 registered agencies in the UK which compile credit reports and you can apply to all of them for a copy of their records on you – Just click here to order your copy. The report itself is likely to contain your entire credit history, so it’s vital to make sure that it is accurate. You can find that even seemingly innocuous details such as a late mobile phone bill lowers your credit score, so ensure that any mistakes are amended straight away. After all, you don’t want an outstanding store reward card bill for example, to prevent you from accessing a loan to help cover significant financial outlays such as university fees, a new car or a wedding. In fact, even some prospective employers can access your credit report, which means that it can have a potential impact on your career. The importance of your credit score to your family’s future shouldn’t be underestimated.

Although it used to be the case that family members living under the same roof often shared a credit footprint, this is generally no longer the case. So, how is the credit score of a married couple for example calculated? Each husband and wife has their own individual report and in truth some potential lenders will base a joint credit application on the individual with the lower score, others on the partner with the higher score. However, it is important to remember that when it comes to a mortgage application, the metrics are far more complex than just your credit report. The income of each individual for example will be a major factor.

If you have children, then read on carefully. Many parents act as guarantors for their child’s rental agreement or other major outlays. By doing so, you will be just as responsible for their payments in the eyes of the credit agencies, as your children. In other words, if your child fails to pay an electricity bill in breach of their rental agreement guaranteed by you, their mistake may well end up on your credit record. It is definitely worth keeping a close eye on your children’s financial activity as well as your own. Even student deals at stores, in banks, etc, which were very attractive during Fresher’s Week require servicing, sometimes long after they have been forgotten. Of course, above all this applies to student loans too. Unpaid student obligations are an all-too easy recipe for a damaged credit score unless you are vigilant.

Perhaps the greatest, although least talked about family credit issue, is what happens when a loved one dies and leaves debt? Are you as a family member liable to pay it back? The short and relieving answer is no. The outstanding amount will be deducted from your loved one’s estate. And if that doesn’t cover the money which is owed, it is generally written off, usually to the annoyance of creditors.
Having a family brings about numerous and constant challenges. However, keeping a careful eye on not only your finances, but those of your children, should prevent you from adding credit issues to the list.

 

 Posted in collaboration with Julie Abrams

 

 

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