Ah, marriage — the merging of the lives of two people in love … and their respective assets. Even if you keep your finances generally separate, your spouse’s credit score can affect your financial life together. So what should you do if your beloved’s credit score leaves much to be desired?
Why does your spouse’s credit score matter?
When you tie the knot, your spouse’s credit score won’t affect yours. However, if you are considering acquiring major assets together, his or her credit score can determine the terms of your loan or whether you qualify for a loan at all.
Let’s say you decide to purchase a home together and apply for a mortgage under both of your names. Even if you have an excellent credit score, your spouse’s bad (or nonexistent) score can hurt your chances of getting approved, or getting approved with favorable terms.
Can’t you just apply for loans in your name?
While you can apply for loans under just your name, you’ll incur more risk by doing this. If most of your debt as a couple is in your name, and you get divorced, you’ll be liable for it. And while a judge may demand your ex-spouse pay a certain amount of it, if he or she does not follow through on payments, your credit score will suffer.
With both of your names on all of your post-marital debts, your spouse will have a financial stake in the event of a divorce. In the case of non-payment, both credit scores will suffer, making it more likely that your spouse will pay his or her fair share.
OK, so we both need good credit scores. How do I help boost my spouse’s?
To build credit, you generally need to take on credit. There are several ways you could help your spouse do this:
- Add your spouse as an authorized user on one of your oldest credit cards. To help your spouse establish a good credit history quickly, add him or her as an authorized user. Before doing this, check with your issuer to make sure it reports authorized users to the credit reporting bureaus. Some may not do it.
- Have your spouse apply for a secured credit card. A secured card is backed by a cash deposit, so it helps build credit without going into debt. For a list of our favorite secured credit cards, check out this article.
- Make sure all of your spouse’s bills are paid on time, every time. If your spouse has a bad credit score, chances are, he or she has had issues with credit in the past. If you have joint finances, it will be easy to make sure all bills are paid on time. However, if you have separate finances, it might be a good idea to set up a weekly financial planning meeting to make sure you’re both on the right track and up to date on bills.
- Encourage your spouse to pay off existing debts. High credit utilization may be dragging your spouse’s score down. Encourage him or her to pay down existing debts, especially credit card debt.
- Encourage your spouse to get in the habit of monitoring credit reports. Every American can request free credit reports from each of the three credit reporting bureaus each year. Both of you should pull your information every year (or three times a year!) to make sure all of the reported data is accurate. Any mistakes can decrease your respective credit scores.
A credit score at any time is just a snapshot of what’s going on in a person’s credit report. The number isn’t static, so a bad credit score doesn’t doom your spouse to a life of bad credit. Help your significant other increase his or her credit score, and your financial future together will look bright!
Wedding couple and money image via Shutterstock