Not understanding your partner’s financial situation can be risky, particularly if your finances are tied together through a joint account.

Money is one of the biggest sources of strife in a relationship. In fact, research from the Law firm Slater and Gordon found that financial issues were the number one cause of divorce in the UK, with one in five couples saying it was the top cause of arguments in their marriage.

Here’s what you need to know about shared finances to help maintain, or improve, your credit score.

Elderly couple together


1. The truth about shared finances

If you commit to a relationship, it seems easy to just put everything in a joint account and have done with it. But sharing finances with someone creates a link, which means their decisions can directly impact your credit history.

You won’t automatically have a link just by getting married or moving in with someone, the link is created when you take out a joint product such as a loan, bank account, credit card or mortgage.

Before you take out any shared products, make sure you both check your credit ratings. You’ll be ‘co-scored’ for products, so if your partner has a bad score it could affect your ability to get future credit.

Find out how to check your credit score here.

2. Am I liable for my partners debt?

Before agreeing to be jointly liable for a debt with a partner, think carefully. Just because you’ve decided to pay half each, that doesn’t mean you won’t be liable for the whole lot if your partner misses a payment.

That means, if your partner fails to pay up on time, you could be chased by creditors for money you can’t afford. Keep on top of any joint debts, and talk regularly to make sure repayments are made in full and on time.

There are apps, such as Splitwise for iOS and Android, which allow you to divide up your bills, work out who owes what to who and who is responsible for paying which bills. You can login and see who has paid for what and which bills are still outstanding, making managing your finances with your partner less of a headache.

Family walking together


3. Don’t leave all the financials to one person

Often, you’ll find that one of you has a better head for finances, but that doesn’t mean you should leave all the money sorting to them.

Even if you let your partner handle most of the finances, it’s important to sit down and regularly go through them together. It's best to both speak openly and frankly, understanding exactly how much money you both owe, and what savings you have. Agree a budget and make sure bills are split fairly.

That way, if you need to deal with an urgent situation, you’ll know who you bank with, who supplies your gas and electricity and how much debt you have. Review your savings, spending and debts together at least once a month.

4. Know your rights on home ownership

If you’re co-habiting, and your partner’s name is on the deeds, you may have no rights to the house, even if you’ve been contributing to the mortgage.

If you’re one of the 3.5 million cohabiting couples in the UK, it might be worth talking to a solicitor to sort out a declaration of trust. This will formalise who owns what percentage of the property and what happens if the relationship ends.

Young couple talking together


5. Splitting up doesn’t automatically separate your finances

Just because you’ve moved out or even got a divorce, that doesn’t mean your finances are automatically separated. Any outstanding debts need to be paid off before joint accounts can be closed.

If you are splitting up with your partner, read how your ex-partner's debt may affect you here.

Get in touch with Cabot today for help understanding your what options you may have.

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