“My ex has ruined my credit rating & I can’t get a mortgage”

A reader asked:

When I separated from my husband a few years ago, the bank wouldn’t split our joint loan so I could pay off my share.

I set up a standing order to pay him my half each month and he said he would pay the bank. I always paid him but he missed three loan payments. I now have a default recorded against me. 

When I found out afterwards he said it was the bank’s fault and his account had been hacked but I guess this was a lie.

I have taken over paying the loan to prevent further damage to my credit rating and he pays me each month, which he has so far. He has also signed an agreement saying he is responsible for the failed payments.

But how can I get these defaults removed or improve my credit rating so I can get a mortgage? We should be divorced next year!

Liable for the whole loan

When you get a joint loan with someone, you aren’t each liable for half of the repayments. To the lender, you are both liable for the whole loan and if the payments aren’t made, the lender could decide to sue either of you for the full amount. The legal term for this is being jointly and severally liable.

That’s why the bank wouldn’t “split the loan” when you separated. It wants you to stay liable for the lot, rather than have half from you and have trouble getting the other half from your ex.

Improving your chance of a mortgage

There isn’t an easy way of solving this problem. Payments were missed, so the default is correct. The bank isn’t going to remove the default from your credit record.

You could add a Notice of Correction to your credit record, saying it wasn’t your fault. But I’m not convinced that a mortgage lender would take much notice of that.

Instead you are into damage limitation – trying to minimise the current problem and make sure no other ones crop up. Taking over paying the loan is a good first step. At least you are now in control and know what is happening.

Repay the loan quickly

The best thing is to get this joint loan repaid as fast as possible.

This will show a future mortgage lender that the problems with the loan have completely gone. Mortgage lenders don’t like recent defaults, but after the loan has been settled for a while your chances improve.

A rough rule of thumb is that when the default is more than three years old and it has been repaid for more than a year you may be able to get a mortgage at an OK rate from a high street lender. When you want to apply, always go through a broker, not direct to any lender as you may pick one that won’t lend to you.

You may face a difficult decision here. Settling the loan early will help your mortgage chances but you may feel your ex is less likely to pay you on time if he knows that you have already cleared the loan.

And then cut the links to your ex on your credit record

When the joint loan is gone – and any other joint accounts you had are also closed – you will be able to break the financial association between your credit record and your ex’s.

You need to ask all three credit reference agencies to do this:

• Experian
• Equifax
• TransUnion (CallCredit).

Until this is done, your records are linked. If your ex gets defaults or a CCJ for other debts you don’t know about, your credit score can be harmed by them.

These financial links have nothing to do with the fact you are still married. Getting your divorce through next year won’t change the way your credit record is linked to his.

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