Financial disassociation: How to get a credit divorce
By Marianne Curphey
When a relationship ends, financial links often remain. Couples who took out a mortgage or another jointly held loan may find themselves still linked financially, even if they are living apart and financially independent.
So is it possible to have a "financial divorce"? The answer is yes, and it is known as financial disassociation. It won't let you out of jointly held loans that aren't paid off, but allows you to cut credit ties with those you shared credit with.
How financial links happen
When you take out joint credit (such as a mortgage or personal loan) with someone else, the credit scoring agencies link you as credit "associates", according to Experian. In the future, whenever you apply for credit, the lender will often check out your associates, too -- and perhaps use their credit history to make its decision.
"Credit reference agencies don't automatically 'link' your credit files just because you're living at the same address," says Sarah Pennells, a personal finance expert, journalist and founder of the website Savvy Woman. "But if you and your partner (or anyone else) have taken out a joint loan or a joint account with an overdraft facility, their credit rating could affect yours when you apply for credit."
The problem is, sometimes those associate links remain even after loans get paid off. And that could put you at risk if your former partner's credit isn't that great. As a result, that link between you and someone with poor credit could affect your ability to get a loan, long after your relationship with that person has ended -- "even when you're applying for credit in your own name only," Pennells says.
"All couples or those who've taken out joint loans with someone else should sever the financial link between them once they split up," Pennells says. "If they don't, they could find their ex's financial record affects them when they apply for credit for years to come."
How to break ties
If you are no longer financially connected to your credit associates, you can ask the credit agencies to remove their information from your credit report, a process called a financial disassociation.
To get a financial disassociation, you'll have to make a formal request with each of the credit agencies. The required forms will generally ask you to list addresses you shared with a former partner and declare that you no longer share any financial ties, including bank accounts and joint credit agreements.
In general, you can get a financial disassociation if you (or your former partner) still live at the same address you once shared -- but not if you both still share the same address, or still share a financial link like a joint account, according to Experian. However, Experian's and Equifax's financial disassociation forms provide space for you to explain your circumstances -- and why you should still be considered for a financial disassociation, even if you share an account or home.
You don't have to be split up with your partner to get a disassociation. Relationship status doesn't matter -- only financial links. In other words, if you took out a loan with a partner and paid it off, you can still get a financial disassociation from that partner, even if you're still happily together.
Dealing with complications
If you have broken all financial links from your partner, you can send in the disassociation application form to the credit agencies, and they should be able to sort it out straight away, says Experian spokesman James Jones.
"The initial hard work can be to sort out your finances between yourself and your former partner," he says. "It can be challenging untangling your financial connections. Once you have done that, then creating a financial disassociation is relatively painless."
However, complications often arise when it comes to mingled finances. Those with joint debt, for example, may designate one party to take over payments after a divorce or breakup. Yet, in creditors' eyes, that debt is still jointly held and may disqualify a former couple from a disassociation.
And then there are mortgages, which entail years of financial entanglement.
Jones says credit agencies will make an exception and grant a disassociation if, for example, a mother remains in the marital home with the children after a divorce but can't afford to pay the mortgage in full or doesn't qualify for a mortgage in her own right.
"In these circumstances, the father might make contributions toward the mortgage, but in all other aspects their finances are separate," Jones says. "If this is the case and they have been living apart for more than six months, then we would be able to create a disassociation."
If you're denied a financial disassociation, perhaps because of an ongoing financial dispute between yourself and your partner, you could put a "notice of correction" on your credit files, Pennells says. It's not really a correction as much as an explanation of your circumstances. The information cannot be defamatory and must be factually correct.
Pennells suggests the following wording when writing a "notice of correction" to the credit agencies:
"The person I'm financially linked to no longer has a relationship with me. I have not been able to close down all the joint accounts, but I am in the process of closing down the remaining joint account and hope to sever our financial connection soon. I am not dependent on my ex-partner for my income" (or whatever is relevant to you).
on the rise
Experian has seen a steady increase in demand for financial disassociations, which is in line with a general increase in awareness of credit reports. They're still relatively rare, however.
"We are still aware that the majority of people do not check their report so links never get cut," Jones says.
Pennells says financial disassociation isn't something all couples do routinely when they split up, as many aren't aware that their credit files are linked to start with. Yet she says it makes sense that disassociations are becoming more common.
"I'm not surprised that more people are applying for financial disassociation as more relationships are breaking up," she says. "We're not always getting married for life but having several marriages or live-in relationships, where we may have joint loans."
Updated: 16 June 2016
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