We’ve all been in the situation of living with a nightmare flatmate who parties all night and never chips in their share of the gas bill. Eventually we move on and think about getting a place of our own. But can the financial situation of that dodgy flatmate who never paid their bills affect your own credit score in the future? The answer isn’t as straightforward as you might think.
Tenants and Individual Credit Checks
Credit checks are made against individuals rather than against an address. If you are sharing a house with someone who is having issues managing their money then this shouldn’t impact on you, whatever the relationship is between you. Your credit score is based on your finances only and looks at how reliable you are at making payments on your loans and credit cards, or in keeping up to date with paying the electricity bill. Therefore, in an average house share situation where everyone manages their finances separately, a stream of red letters coming through the door for someone in the next room shouldn’t affect you.
Although the credit referencing agencies are by and large reputable and trustworthy, mistakes do happen. It’s always worth requesting a copy of your full credit report from the three main agencies in the UK which are TransUnion (previously CallCredit), Equifax, and Experian. Check through the information they have about you carefully to make sure there is nothing on there which should have been on someone else’s file, for example. If there are any inaccuracies, the agencies will correct the errors if you can prove their mistake.
If things get really bad with your housemates and the bailiffs come calling looking for payment towards a debt, then don’t worry. Although it’s never pleasant to have people knocking at your door demanding payment, the bailiffs can’t take anything of yours to put towards someone else’s debt. It’s always a good idea to sit down periodically with housemates and have a frank discussion about finances and how to best manage paying the house costs.
Joint Accounts with Housemates
There is one scenario in which a flatmate’s poor money management could affect yours and this is if you have a joint account with them. It might seem sensible to set up a joint “house account” to cover bills, or for expenses like food and rent. But being named on a joint account with someone creates a financial link between you and the other people on the account. If that other person then gets into financial difficulties, then it could impact on your credit record too. This is perhaps less of an issue when it comes to a flatmate scenario, but it’s something to think about if you’re moving in with a partner and you haven’t had joint finances in the past.
Perhaps the best advice for anyone in a flat share situation is to keep finances totally separate. The difficulty comes with bills like council tax or electricity, where one person has to be named on the bill and take responsibility for making payments. The downside of being the person named on the bill is that you are the one who must make the payment and chase your housemates for their contribution. On the other hand, being the one in charge of making the payments should have a positive effect on your own credit rating.
When you finally move out of a flat share, always contact the gas or electricity company to get your name removed from the account. If you don’t do this and the remaining sharers don’t make the payments, then the default will go onto your record and the company will chase you for their money.