Should I mix my finances with my partner's?

When you and your partner are paying household bills together and taking joint responsibility for the monthly outgoings, it makes sense to have all your money in one place.

However, it is worth considering what will happen to your individual credit ratings when two bank accounts become one.

Any joint application for credit, be that a loan, mortgage, or joint current account, automatically creates a financial association between the two of you which will appear on both your credit reports.

This applies to joint applications between you and your significant other, but also between you and a friend, a member of your family, or anyone else your finances may be mixed with.

Remember

Whoever you mix your finances with, this financial association will mean that their monetary behaviour (past, present, and future) will affect your credit rating - and vice versa.

Is mixing your finances a good idea?

It may be helpful to take into account the advantages and disadvantages of getting a joint account with your partner before you take the plunge.

Good: You will both have access to the funds in your new account as it will be registered in both your names.

This can be hugely helpful in ensuring monthly outgoings are equally met by both of you, or for building up a joint nest of savings.

Bad: Many couples simply contribute an equal amount each month to pay for bills, this could cause a problem if you earn more than your partner or vice versa.

Consider each paying a percentage of the bills according to how much you earn instead.

Best of both worlds

Keeping your own separate account open, however, so that you maintain some measure of financial independence.

You could try setting up a standing order from your own account to contribute a certain amount of your salary into the joint account each month.

What are the drawbacks?

It may be the last thing you want to think about, but you should consider what would happen to your finances if your relationship with your partner took a turn for the worse.

• If you decide to keep all of your money in a joint account and choose to close down your own account, your partner will have just as much access to your funds as you do.

  This puts your money at unnecessary risk.

• Any joint credit agreement that you have with your partner will contain small print stating that you are jointly and severally liable for repayments.

  This means you are both equally responsible for repaying debt. If your partner fails to keep up their half of the repayments, you will be chased for the remaining half.

How is your credit rating affected?

The financial association that is created between you and your partner when you set up any joint agreement together means that your partner's attitude towards money has a very real impact on your finances.

This does not just apply to discrepancies that might occur due to your differing spending habits. Your partner's credit history and future credit scoring will directly influence your own chances of getting credit.

For example, if your partner has a poor credit history, this will now directly affect your chances of success when applying for credit.

Likewise, even after a joint agreement ends your partner's credit rating will continue to affect your own.

Did you know?

Your credit rating will not be affected if you are simply living with someone or even if you are married; your finances only become tied when you apply for a joint credit agreement together.

Can you remove a financial association with your partner?

If you have had a joint agreement with a partner in the past but have since split up and no longer want to be affected by their spending behaviour, there is a way to extricate your credit rating from theirs.

• By applying to be financially disassociated from your partner, you can ensure that your finances will no longer be affected in the future.

• You can also request to have a statement of correction put on your credit file which will explain any discrepancies that might have occurred.

• After doing so, if you would like to disassociate yourself from anyone on your file, you can apply for disassociation. You will need to contact each credit referencing agency directly to request the necessary forms.

If you are not sure whether or not you may be financially associated with someone, you can find out by checking your credit report.

Applying for joint credit or a joint current account with your partner may be a wise practical step in managing your finances - just be sure to consider how your credit will be affected by the move in the future.