Will my credit rating be ruined by how brother runs joint account?

Q&A: Dominic Coyle

My brother manages our joint account very poorly, will it affect my credit rating when my wife and I buy a house? Photograph: iStock

My brother manages our joint account very poorly, will it affect my credit rating when my wife and I buy a house? Photograph: iStock

 

I bought a property with my brother in 2004 and we put a joint account in place then. I bought another property with my wife in 2007. We moved abroad for work in 2015 and will move home in the next few years and hopefully buy a new house.

As my brother lives in the property, he looks after the tracker mortgage repayments every month. The issue is that he manages the account very poorly and it is consistently overdrawn, although he has not missed a mortgage repayment and has an overdraft facility. Withdrawals constantly up to the overdraft facility and often beyond when the mortgage goes out.

My wife and I have excellent credit ratings and high earning prospects. Will the poor management of this account will negatively affect our joint rating?

Mr CH, email

Financial dealings with family members are always very sensitive, because if things do not run as smoothly as expected, it is always more difficult to confront the problem.

Your first action should be to ascertain the status of your credit rating. Anyone can do this by applying to the Irish Credit Bureau (ICB).

The bureau collects data from Irish lenders on the performance of people in meeting the terms of their loans and, under the 1988 and 2003 Data Protection Acts, you are entitled to a copy of any data they hold on you.

The bad news, for you, is that activity from a joint account in respect of a loan in both names is likely to be registered against both individuals.

The good news is that the main concern of the ICB, and the lender, is arrears, ie missed payments or loans that are not paid off. In your case, it appears that loan payments are made every month (but that this pushes the account into the sphere of its overdraft facility or even beyond it).

On that basis, it might be that he (and possibly through him, you) is trying the patience of that particular lender but might not be adversely affecting your credit rating.

Anyway, there is no use in worrying when it is perfectly possibly to find out. You can apply to the ICB by phone on 01-260 0388 or online at https://secure.icb.ie/cr_personal.jsp, or you can download an application form at icb.ie.

It is a fairly simply process, will cost you just €6 and takes just a few days to turn around.

The report you receive will have your personal details – name, date of birth and any addresses you used at the time of applying for loans – as well as the names of any lenders and loan account numbers for active loans or loans that were active at some point in the last five years.

They also include details of repayments made or missed on every one of those loans each month as well as the fact that any loan was either not cleared by the end of its term or beyond and whether any loans were settled by the lender for less than the face value you owed. Finally, if the bank ever took any legal action on the loan, that would be mentioned.

The data is held for each individual which means the data on your wife’s credit rating would be separate from yours and would require a separate application.

If there are mistakes in the data, you can request (through the relevant lender) that they be changed. However, changes would only be countenanced in the event of an error and, in relation to a joint account, the fact that your arrangement is for it to be run by your brother means you would not be absolved of how it is run or that you could have a credit record changed on that basis.

If there is an issue with the credit rating, then it is certainly important that you take steps to ensure future payments are correctly handled in order to repair any damage to the rating.

In that event, it would appear to make sense, if you can get your brother to agree, to establish a joint account purely for the purposes of meeting these mortgage payments. Payments into and out of it should be by direct debit and it should not be used for any other purpose.

People have different approaches to managing their financial affairs. Some are more laissez faire than others and this can certainly lead to difficulties. A dedicated joint account for this investment managed by direct debit removes the human element. It also means there should be no need to worry about overdrafts – authorised or unauthorised – and should hopefully ensure that family harmony is retained.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes. This column is a reader service and is not intended to replace professional advice.

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