MonthOctober 2019

Property separation and creditworthiness

To obtain a loan , we must meet some of the necessary requirements set by the bank. The sum of these requirements and determinants is the so-called creditworthiness. It is a peculiar kind of sieve, which first sift candidates for credit. As far as we know our credit standing – we can predict the bank’s decision. However, questions arise when new, previously unknown elements appear against the background of creditworthiness. Property separation is one of them. Does it affect the ability and thus the bank’s decisions? If so, how and what should we know about it?


What is credit standing?

What is credit standing?

Creditworthiness is information for the bank how credible and reliable you are. If it is high, the bank gets information that entrusting you with a given amount involves little risk, and thus, increases the chance of paying back the loan with interest, which ultimately is pure earnings for the facility. However, if its result is poor, the bank may take a negative decision, however, not to entrust you with the amount. In short – you need to take care of your integrity, paying off your obligations conscientiously and on time. In addition, other elements affecting the final assessment of your reliability are: your age, possession of liquidity, stable income, the amount of other debts (and repayment dates).


What is property separation?

money loan

In the case of marriages, we have two different options to choose from: stay together or separate. This means that the spouse and spouse decide about their finances separately, and each of them earns separately for their own, more or less necessary needs. The method of doing so is becoming more and more popular. Most often, such decisions are made by couples with a daffodil, partners without an official wedding, and all those who do not want to build joint property. This decision brings a lot of positive effects – among others, everyone takes on their responsibilities without dividing them in half. In the absence of separation, liabilities and ownership are simply divided in half. Therefore, if we prefer to be responsible for paying off the debt ourselves – this is an almost perfect choice.


Property separation and credit

Property separation and credit

So what does this situation look like in the context of taking loans and thus creditworthiness?

  • First of all – property separation allows for deformation of the contract. Therefore, if our spouse decides to take out a loan, we can interfere in the debt distribution records. While it would normally be divided in half, in this case we can divide it in absolutely any way for us.
  • Secondly – we are not married to the bank. We are a company. This means that each person in the relationship is treated separately and independently
  • Thirdly – in this way we protect ourselves or part of the family against harmful or irresponsible financial decisions. If our spouse gives the wrong investment decision – he will take the consequences of the action on his own. If he succeeds, he belongs only to him
  • Fourthly – separation makes it possible to incur various, smaller obligations independently, regardless of the obligations of the spouse
  • Fifth – credit decisions do not require a spouse’s decision or knowledge. Hence the great desire to sign these documents – we do not want to take responsibility for wrong decisions of the partner. In the case of marriage – the bank will not grant credit without the consent and knowledge of the other spouse.
  • Sixth , asset separation is not assessed by the bank. It does not signal good or bad financial conditions. The bank takes a neutral stand on this matter.

It means, therefore, that in the case of the debts or property problems of the spouse, our card is “clean”, and hence – the property capacity increases and is much better for us than in the case of debts. However, it is worth mentioning that the distribution of the salary of two people reduces average monthly earnings, and thus – reduces creditworthiness. To sum up, therefore – there is no clear answer to the question of whether property separation affects the ability positively or negatively.