Joint loan applications might be a problem, and joint accounts could be dangerous.
In any good marriage, two people come together and form a single unit, one that is stronger and more capable than either person ever could have been while single—like a two-person Voltron, only with fewer robot lions and more matching towel sets.
But when it comes to credit scores, getting married is a little more complicated. Your hearts may become one, but your credit scores will not. There is no such thing as a “married credit score.”
And if one of you has a significantly worse score than the other? Well, that’s where some of those promises in your wedding vows will really come into play.
First, some credit score basics…
“Most credit today is awarded based on a credit score or “FICO” (which by the way is just a company name “Fair Isaac & Company”) and that number is very powerful in determining your financial future,” says Justin Lavelle, Chief Communications Officer at BeenVerified.
“Your credit score will determine if you get a loan, and more importantly how much you will pay for that loan.”
FICO scores range from 300 to 850. The higher the score, the better your credit. Generally, a score above 720 means you have great credit, and a score under 630 means you have bad credit.
According to Katie Ross, Education and Development Manager for American Consumer Credit Counseling, “Your credit score represents your financial reputation in a numeric representation. Therefore, combining finances once you are married can be impacted with a poor credit score of one person in the relationship.”
“Credit scores play a critical role in instances such as applying for larger loans such as for a car or for a mortgage,” says Ross. “Therefore, a higher credit score means you will borrow at potentially low-interest rates, resulting in larger savings in the future.”
One Couple, Two Credit Scores.
Throughout a marriage, folks are going to be faced with any number of large financial decisions, most of which will require getting a loan. And applying for a loan will mean facing the hard truth that one bad credit score between you can drastically hurt your chances of approval.
According to Ross, “Although marriage combines finances between partners, it does not mean your credit scores are merged. Your credit scores can play a major role in finances if and when you apply for loans as a married couple. In a joint application, creditors assess the eligibility terms based on the credit score of both parties.”
Lenders are notoriously risk averse, which means that they will generally use the lower of the two scores to determine your creditworthiness.
There’s always the option of leaving your spouse off the application, but Lavelle points out that there are some significant downsides to that as well:
“If one person has terrible credit, they more than likely will need to be left off the credit application, which can mean their income is not considered as well. This can be a real burden if the purchase in consideration is a large one, such as a home or car.”
“If one spouse has a great credit score and the other has a low score, the marriage most likely will be penalized because credit will be awarded based on the lower score,” says Lavelle.
“If you are looking to buy a house, this penalty can be to the tune of thousands of dollars you end up paying in higher interest costs over the life of the loan—and that is if you are even given the loan.”
Joint account pain.
It’s common for married couples to open up joint checking accounts and credit cards. And in many situations, this is a totally safe practice.
But Lavelle warns that opening joint accounts when one spouse has bad credit could end up dragging down both your scores:
“Be wary of having joint accounts if your spouse is bad with money or has poor credit. Once you sign on the “dotted line” and open a joint account, you are responsible for that account and subject to the derogatory remarks on your credit if your spouse fails to keep the account current and pay on time.
“Once you are married, if you do not maintain individual credit, your credit rating could suffer and you may not be able to obtain credit in your individual name. This happens because your credit report will show long gaps of time that you had no credit or accounts in your name.
“If the time comes that you need to open an account, it may be difficult or impossible to do because, in essence, you have adopted your spouse’s credit, good or bad. It will be like starting over for you.”
Lavelle also warns that a spouse’s bad credit may affect your assets—meaning your house, car, and other valuable belongings:
“This usually doesn’t come into play unless there is a real mess and people are suing to collect their money. However, it is important to understand that if you are married to someone that cannot control spending and doesn’t think making payments is important, you may be at risk.
“In this situation, if you do not open a joint account with this person then you will not be individually responsible for his or her debts and your individual credit will not be disturbed by their bad actions, but the problem doesn’t end there.
“In a marriage, if you have joint bank accounts and own property jointly, those assets may be available to creditors of the spouse with a poor history. This is usually only the case after suit and judgment, but with a judgment, a creditor can levy against joint accounts and joint assets.
“It may be best if your spouse is irresponsible with money to just keep everything separate.”
Will your bad credit affect your spouse?
So far we’ve given you a lot of words about how marrying someone with bad credit can go horribly wrong. (You’re welcome.) But it would be silly to let your love for someone be determined by their credit score
Instead, you and your spouse will just need to take some much needed financial action. And the first step you’ll need to take is—funnily enough—the exact same step you need to take when fixing any issue in a marriage: communicate.
“In order to overcome these credit score issues,” says Ross, “it is important to communicate these among each other. Carefully go through each other’s credit reports to identify any errors and take immediate action to correct them.”
From there, you’ll want to start practicing good money habits. According to Ross, “In addition to identifying errors, the next step you can take as partners is to remind each other to make timely payments. Setting up automatic bill pay, and reminders can help avoid further reductions in your credit score.”
Ross says that “Depending on your financial goals as a married couple, it is important that you take corrective action along the way.
“Coming up with a plan to pay off outstanding credit card debt, avoiding opening any new credit lines or closing too many old accounts or even merely over-utilizing credit can be pitfalls.
“Working together to avoid such pitfalls and practicing good credit habits can help married couples recover their credit scores and reach their financial goals.”
All marriages are going to encounter a rough patch or two (and that’s if you’re lucky). Having a spouse with a bad credit score could certainly be one of them. But smart money management and frank communication can help make it a minor one.
Follow these tips and you can save those big fights for stuff that really matters—like matching towel sets.
Justin Lavelle (@BeenVerified) is a Scams Prevention Expert and the Chief Communications Officer of BeenVerified, a leading source of online background checks and contact information. BeenVerified allows individuals to find more information about people, phone numbers, email addresses and property records.
Katie Ross (@talkcentsblog) joined the American Consumer Credit Counseling (ACCC) management team in ’02 and is currently responsible for organizing and implementing high-performance development initiatives designed to increase consumer financial awareness. Ms. Ross’s main focus is to conceptualize the creative strategic programming for ACCC’s client base and national base to ensure a maximum level of educational programs that support and cultivate ACCC’s organization.
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The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.