Help your spouse improve their credit

By Benjamin Salisbury

There are many ways to show your partner your support, but one grand gesture you may want to consider is to help them boost their credit rating. It may not be as romantic as sending a rose for every day you've loved them, but it will be appreciated all the same (or maybe more). There are several ways to help improve your partner's credit score, and it will not only benefit them, but also help improve your finances as a couple.

Encourage them to take basic steps
The first thing to do is be sure your significant other has taken all basic steps toward building a good score. Encourage your partner to register on the electoral roll if they have not already done so. Similarly, if they have just moved in with you, make sure they update their address with all their financial providers, as well as their driving licence and passport. Even something as simple as forgetting to update your new address on a mobile phone contract can affect your ability to get credit.help-spouse

You should also remind your partner not to make too many applications in
a short space of time, as this can have a negative effect on a credit score.

Finally, remind them to regularly check their credit file from the three credit reference agencies, Equifax, Experian and Callcredit. The reports cost £2
or less.

Take on some of their debt
One way to assist your significant other is to transfer their credit card balance to a balance transfer card -- under your name.

This strategy is possible, legal, and with many lengthy, no-interest balance transfer deals on the market right now, it's smart. It'll give you, as a couple, breathing room to clear the balance, avoid the interest, and get your mutual finances on track.

Transferring a balance to the person with the better credit record can have a couple of advantages, Ian Williams, director of communications at Ocean Finance, said in an emailed response to questions.

"Firstly, you may qualify for a better interest rate than them, or even a 0% deal, so you'll save money," he said. "Secondly, your partner's outstanding indebtedness will reduce, which will show on their credit history."

If your partner's credit is average to poor and they're carrying debt, chances are, their credit utilisation ratio (the amount of debt they owe compared to the credit available to them) is high. When it comes to credit scores, the lower the utilisation ratio, the better. And since credit utilisation counts for a large percentage of your overall credit score, easing your significant other's debt load can be a huge step toward improving their score.  

Keep in mind, however, that there are risks with this approach. Firstly, you will be on the hook for the debt. Your partner may have the best intentions of paying the bills, but if he can't or the two of you split up, because the card is in your name, you have to make the payments.

Finally, while this strategy can help you, as a couple, save potentially thousands of pounds by avoiding interest, if this is your partner's only debt, transferring the entire balance won't help your partner build their score.

A low credit utilisation ratio is great, but it's not the only factor that makes a good credit score. Be sure your partner has another credit card or loan that they pay back on time each month to continue to build their score. If this is your partner's only outstanding debt, you may want to only take on a portion of it, or simply help your partner with payments instead.

If your partner wants to start over with a clean slate, take the whole sum and encourage your significant other to get a credit builder card. Have them start with a small balance and low credit limit and repay it on time, which will help them rebuild their poor score and enable them to later apply for a card with better terms.

Be sure they're financially disassociated from exes
If your partner has had financial ties with someone in the past that left them with a poor credit rating, have them check their credit report to see if they are still financially associated with their ex. If so, you can help your significant other apply for a notice of disassociation. This will remove the negative links that may be contributing to their poor credit rating.

Create a financial association between the two of you
Adding your partner to your current account or opening a joint account will create a financial association between the two of you. This will allow the partner with the lower score to benefit from being associated with your stronger credit rating.

If you apply for a credit card that you'll share, put the account under your partner's name. A credit card account with multiple authorised users only benefits (or hurts) the main accountholder, because transactions are only tied to that person's credit. If you do this, be sure you're helping your partner make payments on time and, if possible, in full each month.

However, Williams suggests this may be a strategy for a little further down the line.

"If one of you has a bad credit history and the other a good one, avoid joining your credit records -- which means avoid taking joint financial products," Williams said.  "Work on improving the weaker credit score through careful borrowing and regular repayment over time before you apply for any credit (or even a bank account) in joint names."

See also: What to consider before adding authorised user;  Beware ‘joint and several' agreements

Published: 11 February 2016