By Amanda Morrall
Joint finances can be a blessing, but they can also be a curse, most damningly when things go wrong.
With close to half of all marriages ending in divorce, the plague of STD (sexually transmitted debt) has become one of the many hazards of love.
Regardless of a relationship ceasing to exist, both parties can be held jointly liable for one another's financial recklessness.
John Scott, general manager of credit reporting agency Dun and Bradstreet, has no cure for broken hearts or bank accounts, but suggests sound management of one's credit rating may stem the pain of an STD.
Checking the health of your credit rating amid the messiness of a break-up may be the last thing on your mind, but if retail therapy is a coping mechanism for the ex it may prove a prudent move, however heartless it might seem at the time. That's particularly true in situations where gambling or drug addictions are an issue and credit binges can spiral out of control.
In the eyes of the law -- and credit providers -- the debt till you part policy does not apply even once you separate.
A bad credit rating incurred by a free-spending spouse may be hard to shake, but the earlier it is detected the better, says Scott.
Under proposed changes to credit reporting methods in New Zealand (expected to be adopted by April 2013), borrowers will have the right to put a freeze on their credit rating, to prevent a total and irreversible ruin reputation.
A freeze won't make toxic debt disappear or erase a damaging credit rating overnight, but it will at least allow the innocent party to alert lenders to the situation and to prevent any further damage to one's credit rating from being done, explains Scott.
"As with all these situations if you talk to the credit providers they'll be in a better position to understand your individual circumstances. I can't say they'll look on it favourably, but perhaps they'll be more sympathetic and willing to work with you."
With 70% of all bad debt owing to one traumatic event (usually death, illness, divorce or unemployment) even the most fiscally responsible can wind up in debt town. Credit reporting companies count on it and until now have traded on consumer's financial foibles, or at least the footprinting of it all.
Incoming rules (awaiting final approval by New Zealand's Privacy Commission) will reshape the reporting parametres.
Whereas credit reporting agencies used to establish credit ratings on the basis of adverse financial circumstances and how much you owe -- including documented incidents of defaults, bankruptcy or civil court judgement -- the new rules will allow for a more "comprehensive'' profiling system.
- 40% of New Zealanders surveyed recently by Dun and Bradstreet did not know what a credit report was.
- 50% didn't know they could get one for free.
- 8% said they didn't want to do one because they were worried what they would find.
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