Avoid Relationship Debt
Relationship debt - be warned! Veda Advantage provides tips to help prevent financial partnerships from turning into financial heartache.
With Valentine’s Day fast approaching, Veda Advantage has issued a warning to potential lovebirds to be cautious before rushing into financial entanglements such as shared bills or credit arrangements, otherwise known as relationship debt.
Relationship debt occurs when someone takes on another person’s loan, debt, bill, or becomes a guarantor under the veil of love or a strong attachment for the other person, rather than for personal gain. Relationship debt is a serious situation where someone becomes legally liable for their partner's, or a member of their family’s debts after the relationship turns sour.
Veda Advantage research indicates there are disproportionate numbers of utilities bills in female’s names, implying women are taking on more utility debt than males. Over 2007 Veda Advantage found 58% of women had utilities bills in their name to only 42% of males.
Additional Veda Advantage gender data, looking at defaults over all accounts, shows that women are more likely than men to pay their credit cards, personal loans, mortgage and overdraft on time. The study into gender reviewed all credit activity recorded by Veda over a five-year period and revealed that men accounted for nearly 55% (54.7%) of total defaults over all accounts.
“The study into gender defaults indicates women appear to be more reliable payers than men,” says Erica Hughes, General Manager of Information, Services and Solutions. “Historically, and according to the Office of Fair Trading, relationship debt is more commonly a woman’s problem as they are more vulnerable to being burdened with their partner’s unwanted debts. However regardless of gender, I would like to warn all Australians to be alert and aware of the legal ramifications when applying for credit in their names.”
“Love may be blind, but financial relationships – in particular debt or credit arrangements – are best entered into with your eyes wide open,” says Ms Hughes. “It’s not pleasant to have to talk about or consider these sorts of issues in the early stages of a relationship, but it can save a lot of heartache later on. Our utilities study indicates women are taking primary responsibility for gas, water and electricity bills. Unfortunately it is not well known that utilities are a type of credit and are noted on your credit file. This means it’s actually quite a big responsibility you are taking on when you open a utility bill just in your name.”
“If you split up with your partner, or they fail to pay their share because the bill’s in your name, it’s your responsibility according to the law. If you default on your account you may find it difficult to secure credit cards, personal loans or mortgages in coming years,” she says.
There are a few simple steps that can be taken to protect yourself from contracting debt from your partner. Veda Advantage recommends:
• Don’t sign. Never sign anything without understanding the full implications of your responsibility. A signature is not a simple measure – it is a legally binding document saying that you will either meet the financial obligation or be held responsible for the debt.
• Seek legal advice. Obtaining legal advice may be a good idea as your legal representative can read the fine print of the legal document, and advise you accordingly.
• Talk. The best thing you can do if you have been left with a pile of bills to pay, is to contact the creditor and explain your situation. They may be understanding talk through other options so you avoid defaulting.
• Share the burden. Be informed about your partner’s finances. When purchasing joint assets and credits are signed in both your names – not only one of your names.
• Be wary of adding your partners name to your credit card as an additional card holder as this means you are ultimately responsible for the card’s debt.
• Keep up-to-date with your obligations. Notify your financial institutions as soon as your relationship ends to close any joint savings, cheque and credit accounts to protect your money. Also ask them to stop any loan redraw facilities from being used, and get this in writing.
• Cut them off. After a relationship has ended make sure your ex-partner no longer has access to your credit card as a secondary account holder. If you change address make sure copies of joint account statements are sent to you so that you don’t miss payment for any bills..
• Ensure your joint account details are sent to you if you move house, and regularly check the activity in them.
• Obtain a free copy of your credit file from Veda Advantage once a year to stay in tune with your credit history.
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For more information please contact
Sally Robertson: 0400 927 003 or 02 9270 0233
About Veda Advantage – www.vedaadvantage.com
Veda Advantage facilitates credit reference checks for Australia’s major banks and lenders and underpins the ability of consumers to exercise choice in relation to consumer credit products. The vast bulk of applications for consumer credit in Australia are checked against the 14 million personal credit history files held by Veda Advantage.
You can apply for a copy of your credit file at www.mycreditfile.com.au or by calling 1300 762 207. A $27 express delivery service fee is payable if the file is needed urgently, or otherwise the file will be available within 10 working days.