You understandably have a deep desire to work out your credit problems and financial situation privately, but if you live with other people, the matter can become complicated. Under most circumstances, your credit history is your personal business and part of an exclusive, confidential relationship between you and your creditors. The credit of your household members won't be affected by your credit, that is, unless your poor payment habits extend to accounts that you share with housemates.
The person most likely to be affected by your credit is your spouse. Although credit is a contract between you and your creditor, the two of you won't be able to jointly purchase important items like a house or a car if you have bad credit. Although not legally bound to, your spouse will likely have to take up the slack financially while you are cleaning up your credit. The strain on your finances can jeopardise your spouse's credit, if for example, there's not enough money left over each month to pay all the bills. In addition, should you divorce in a community property state, a judge could require one spouse to pay the debts incurred by another during the marriage.
If you have a son or daughter who is about to go off to college, your credit could negatively affect your child's ability to get a student loan. For example, the federal Parent PLUS loan program, in which parents borrow money for the cost of their children's education, requires that applicants have no adverse credit history. Given the high cost of a college education, parent loans are becoming increasingly important.
Your bad credit will make it difficult to go in with your housemates on joint purchases on credit. In addition, if you pool money in a bank account, for example, from which you pay your joint bills, that account can be subject to wage garnishment if a creditor seeks a judgment against you. In addition, it's common for cohabitating couples to put each other on their credit accounts. If you make those credit accounts joint-user accounts --- as opposed to authorised-user accounts --- your payment habits will be reflected on your loved one's credit report.
Leases and Utilities
If you are in a roommate situation, your bad credit can cause embarrassing problems. For example, if you are going after a lease in both of your names, you may be charged a higher deposit because of your credit. Some financial advisers say it's important to do a credit check on potential roommates, because bill paying habits may reflect how responsible that person is. You don't want someone who will skip out on a lease, neglect to pay a month's rent because of overspending the month before or allow utility bills to go unpaid. If you don't pay any of the bills that may be joint accounts, landlords and utility companies can hand over a delinquent account to a bill collector, at which point your roommate may be on the hook for bills you were supposed to pay.
- Experian: Credit Report May Be Hurt by Joint Lease, Utilities with Roommates
- Nolo.com: Living Together: Debt, Credit, Taxes and More
- SmartDollars: Money Issues That Concern Unmarried Couples
- U.S. Department of Education: Direct Loans: Parents
- Bankrate.com: How to Choose a Roommate
- Federal Trade Commission: Overview of Household Debt Exposure
- Nolo.com: Debt and Marriage: When Do I Owe My Spouse's Debts?
- BSC Alliance:Debt Problems: Is My Spouse Responsible for My Debts?
- Smart Money: The Six Financial Mistakes Couples Make
- LifeManagement.com: Preparing for Cohabitation: Credit Problems and Resolving Disputes
- DaveRamsey.com: The Truth About Debt and Relationships