It can be very challenging to build a strong financial future together, even for the most compatible of couples. It’s even more difficult for newlywed couples with very different credit scores to blend their finances and sometimes, it’s even unwise to do so.
If your credit is good and your other half’s credit is not, it is crucial to understand how your spouse’s bad credit history can affect you. Learn how you can protect your good credit record and how you can help your spouse build a better credit history together.
Get a Full Financial Disclosure BEFORE Marriage –
Most financial experts recommend that BEFORE marriage, couples should review their credit records together. For those who are already married, do a credit review together as soon as possible. Discuss your options and come up with a strategy or game plan.
You and your current or soon-to-be spouse should put all of your financial records out on the table and have a discussion about your savings accounts, incomes, nest eggs, and credit accounts. If one of you has a “not so good credit history” this can affect you both when you start applying for new credit together or open joint accounts. Evaluating your credit histories together can help prevent any unpleasant surprises in your financial future.
How Marriage Affects Your Credit Report –
Most couples believe that when they marry, a new merged credit record is created. The fact is that every credit record and credit score is attached to one Social Security number. This means that after the marriage, your past credit record stays separate from your spouse’s credit record and does not even reflect your new married status.
However, there are cases when your spouse’s bad credit record can have a negative impact on your credit. The following scenarios will help you understand how a couple’s individual credit records can start to affect each other:
- When a married couple applies for joint credit and/or a loan, a mortgage, or a rental property, most businesses evaluate the creditworthiness of BOTH credit records since both individuals will be on the documents and will be responsible for paying off the debt. If one of them has an unfavorable or bad credit record, the credit request might get denied. If it is approved, it’s likely that the couple would have to pay a higher interest rate than they would have to pay if both of their credit scores were good.
- If your spouse has a bad credit record and you add him or her as an authorized user to your existing account, your account will now show on your spouse’s credit record. However, it may or may not change your spouse’s credit score because there are a number of different factors that make up a credit score.
- Adding your spouse, with a bad credit history, as a joint account owner to your account can help better his or her credit score. On the other hand, adding you to his or her account could harm your credit if he or she has a negative history on the said account.
- Cosigning for your spouse with a bad credit record may also harm your good credit. As a cosigner, you are responsible for the debt if the borrower does not pay. Unless you are ready to manage and make payments toward his or her accounts, avoid cosigning for your spouse if necessary.
How to Protect Your Good Credit –
While a bad credit record can be a result of extenuating circumstances like extensive medical bills, it can also be a reflection of a person’s way of managing his or her finances. If your spouse’s credit record shows unpaid debts, high balances, and other negative records and you have not had a chance to discuss these with him or her, keep your finances separate until things get fixed or cleaned up on their record. This means not adding your spouse to your accounts or vice versa and not opening up any joint accounts or new credits accounts with your spouse.
Good News for the Financially Savvy –
So your beloved has a dismal credit score. All is not lost; credit reporting is done on an individual basis. That means that your past credit history will never be merged with your spouse’s. You still have the same social security numbers, and that ten-year-old bankruptcy is not going to suddenly show up on your personal credit report. Since you obviously have a better knack for keeping a good score, perhaps you can even help your spouse repair his or her own credit report.
Your credit scores remain separate even after marriage, so you can still keep it safe. If your partner is really that irresponsible, you may want to keep the bulk of your finances separate. It’s best that you both keep your own checking accounts and credit cards anyway, just to keep a credit history going. If you are better at handling finances or your partner is the savvy one, consider helping each other every month with paying bills on time, making smart financial decisions, and creating a household budget together. You want to be on the same page with your finances and helping your partner is part of a successful marriage. You are a team now!
You do have to be careful, however, with any sort of joint accounts or loans. Any payments made on a joint loan will be recorded on both partners’ credit reports. Unfortunately, there may not be any way to avoid joint status in some cases, especially for big loans like a mortgage.
Now, your partner’s bad score may bring higher interest rates or even outright rejection, but not always. If you’re planning to apply for a joint loan at some point, some damage control is a good idea. Pay all of the bills on time, even if it’s just the minimum. Ideally, you shouldn’t keep a balance on the credit cards at all. Making minimum payments isn’t going to improve that score very quickly, but at least it will keep it from dropping any further. Late payments are one of the biggest reasons why credit scores take a hit.
For Credit Help, Contact Advantage CCS
Not many people would consider credit scores to be a good topic for intimate, romantic conversation, but marrying someone with bad credit can have some unwanted consequences. You probably shouldn’t bring it up on the first date, but you shouldn’t ignore it either. You definitely want to know what you’re getting into. A bad credit score could mean higher mortgage payments and higher car payments, and it may even make getting a loan impossible.
Bad credit – it’s the grown-up, modern day version of the timeless boogeyman, and unless you have huge piles of cash lying around, it’s important to just about any large purchase you might make. Unfortunately, it’s distressingly easy to ruin your credit score, and repairing it is often a slow and arduous process.
If your potential or current spouse’s credit problems are leading to relationship problems, you may want to contact Advantage CCS for more information on our Debt Management Program or our Credit Report Review service that we offer. Our certified credit counselors can help put you and your partner on the road to financial success, and they can help set your mind at ease as you plan your big day together.