Does Opening a Joint Bank Account With Someone Ruin Your Credit?

Co-mingling household funds via a joint bank account is a common practice among married couples, but parents who wish to monitor their childrens spending and individuals caring for their aging parents also benefit from sharing a bank account. While convenient, sharing a joint bank account with an irresponsible individual could threaten your credit rating.

Opening an Account

Each banking institutions policies differ but, in general, banks require that customers undergo a credit check before opening a new checking account. Most banks conduct soft credit checks for customers who simply wish to open a new account rather than apply for a loan. Unlike hard credit checks, which shave several points off your credit score, soft credit checks do not diminish your credit rating.

Misconceptions

Some individuals mistakenly believe that opening up a joint bank account with someone with a tarnished credit history will adversely impact their credit rating. Sharing a joint bank account, however, does not cause the account holders credit information to mingle even if those account holders are married. While banks report loans and credit cards to the credit bureaus, banks will not report your joint checking account and who you share it with on your credit report.

Warning

The act of opening a joint bank account cannot ruin your credit rating. Failing to properly maintain the account, however, can. With a private account, you can control how much you spend to ensure that you never overdraw your account. If another persons name is on the account, you no longer enjoy full control over the funds. The other account holder is free to withdraw money at will.

If the other account holder overdraws the account, your bank may charge you a fee for every purchase you make while the account is overdrawn. If neither you nor the other account holder pay the fees, the bank will turn the account over to a debt collector. Debt collectors will report the debt to the credit bureaus and it will cause considerable damage both to your credit and that of the other account holder.

Considerations

If you are worried about the credit damage you may sustain should the other account holder mismanage funds, consider signing up for online banking. Online banking lets you view recent withdrawals and deposits and check the accounts balance 24 hours a day.

While online banking isnt always 100 percent accurate (transactions sometimes take a day or more to go through), it gives you a ballpark figure of the accounts current status whenever you need it helping both you and the other account holder remain within the accounts limits and protect your credit scores.