Credit Management

Are Joint Accounts a Good Idea for Your Credit?

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The number of people with joint accounts has been dropping sharply over the past few decades. This is because having one grants scrutiny into each person’s financial affairs. For example, your fellow account holder can see whatever transactions you commission, even when you would rather prefer some of them be kept private or discrete. In addition, a joint account gives you limited recourse when the other party overspends from the account without your knowledge.


Photo credit: news.com.au

The current volatile state of relationships and skewed human nature, coupled with the astronomical divorce rates presently being experienced in America, also make the prospects of a joint account less attractive for most people. Simply put, you can never truly know when it’s safe to completely trust other people.

Despite these concerns, a joint account can have more dire consequences than you may imagine. A joint account spreads financial liability, including debt. This can affect the stability and credibility of your credit score if these obligations are not thoroughly met. One partner’s failure to meet their end of the bargain when you part ways (with joint debt) can harm your credit score. If they default on their responsibilities, regarding loans you took on utilizing your joint account, it can also put your credit score in shambles.

Should you therefore, shun joint accounts because of these risks? Well, not entirely. If you’re both careful about keeping your credit score clean, you can avoid many problems. This article gives you a few tips to help you make sound decisions regarding a joint account.

Check credit score

Always make a habit of checking your credit score, along with your partner’s, on a regular basis. Knowing what the three credit bureaus have on your credit report has numerous benefits, like unmasking errors in your credit history reporting, determining your current creditworthiness and uncovering identity theft. Knowing your credit rating, and that of your joint account partner, also helps you know what you’re getting yourself into with the joint account.  If your partner had a problem keeping up with their bills and debts in the past, it’s not worth opening a  joint account with them. However, if you choose to go ahead with one, then supervision and safeguards should to be put in place.

Ask the tough questions

Before opening a joint account, you need to ask yourself and your partner certain tough questions to be sure you’re making the right decision. For example, by factoring in your partner’s credit score and spending habits, is a joint bank account a good idea?  You also need to consider the possibility of the relationship ending. Make a decision about what will happen to your joint accounts’ shared credit obligations. Do you accept the possibility of paying your joint credit when you’re no longer together, or when your “former” partner refuses to pay to avoid compromising your credit history?  Are you ready to put your credit score and creditworthiness at risk for your partner? In addition, consider the implications of events such as a divorce or bankruptcy on either of you. How will your partner filing bankruptcy affect you? Are you comfortable with all of these answers?

Manage your finances better

Many people with joint accounts suffer because of their partners’ poor credit behaviors. Partners, who use joint money poorly, either can’t keep up with debt repayment or fail to honor joint debts. If you split up, it can hurt your credit rating- joint account holders are both scored by the nation’s three credit bureaus.

Keeping your spending lean and managing debt are super ways to actively manage your finances and boost your credit rating.

Overall, is a joint bank account a good idea? Well, it depends on how you handle it and on the joint decisions you make. A joint account helps you avoid finance arguments (biggest cause of relationship breakups), and allows easy sharing of expenses and money with your partner. The account may also strip you of your privacy on personal spending, while limiting your options when your partner is excessively spending money from the joint account.  In addition to this, the joint account also puts your credit history on a risk path in the event you dissolve the relationship, since there will likely be joint financial obligations such as unpaid debts, credit or mortgages attached to the account.

Therefore, the best strategy to keep your credit clean with a joint account, is to know what you’re getting yourself into. This entails going beyond knowing your partner’s financial and spending behavior (or controlling it). To stay safe and make sure your joint account doesn’t harm your credit rating, you should consistently monitor the three credit reports (yours and your partners), pay all debts on your joint account debts and actively manage your finances.