Marriage is a big step for many people, and while it's pretty easy to get lost in the planning and excitement of it all, one of the most common reasons that couples experience problems is because of money. Since the first large joint event, the wedding itself, is often incredibly expensive, as are many of the joint purchases that will be made after that, it's crucial to understand how marriage can affect your credit scores. Ideally, this would be done before the big day, but by discussing finances, budgeting, and spending habits in intimate detail soon after, many future problems can be minimized or avoided altogether.
Marriage will not directly affect your credit scores individually, and you will each retain your personal credit history and score. However, any joint purchases accounts or debt you take on can have an impact. Lenders will also evaluate both credit scores if joint income is required.
While it may be disappointing to some that once married they do not then have a joint credit score, it may also come as a comfort to others. On one hand, you won't be able to improve your credit standing and overall credit score simply because you married someone with better credit, on the other hand, a spouse with bad credit won't need to worry about damaging their partner's good credit through marriage either. However, just because your credit won't merge after marriage doesn't mean there aren't risks, here's what you need to know about marriage and credit scores.
Marriage And Credit
Marriage and credit is a complicated issue because while you won't have a "joint credit score," as some people seem to think, there are still situations where a married couple can have a powerful impact on each other's credit scores. Marriage itself doesn't have any specific impact on the credit score of either party and even though it won't have any immediate impact on the credit scores of the partners, it does have potentially significant implications for finances during the marriage as well as if the couple decides to get divorced.
When You Get Married Does Your Credit Combine?
When you get married, neither your credit scores nor your individual credit reports become combined or merged. However, you will have the opportunity to add your partner as an authorized user on your current credit accounts, which has the potential to alter your credit score for better or for worse, depending on your situation and financial habits.
In some situations, however, the credit of each party will be considered simultaneously when applying for certain types of debt like car loans or mortgages. This can be detrimental if the couple plans on applying for a mortgage to buy a house, for example, if one partner had a bankruptcy or foreclosure in their recent credit history. In cases like this, even if one partner has excellent credit, a partner with a very damaged credit history may preclude them from being considered for a mortgage or even an auto loan.
This is because for many joint accounts, like large loans or mortgages, the lender will require income information for both partners. This means that they will also be checking the creditworthiness of both partners before deciding on the loan, and if one partner has a FICO score of 815, but the other has a score of 620, you may be denied a mortgage entirely in some cases. In others, you may only receive lender offers that are less than optimal, or downright unfavorable, like a lower approval amount and much higher interest.
In cases like these, where the partners know ahead of time that it may be difficult to get favorable lending offers or to even get approvals in the first place, it may be much more fortuitous to work on repairing the credit report and credit score of the partner with subpar credit. This can often save much more time in shopping for lenders, in addition to providing much better interest rates and loan terms when the time comes to apply.
How Does Credit Work When Married?
When you get married, each partner will have the chance to add the other to various accounts that they hold. This means that if one partner has a credit card or several, they will be able to add the other partner as an authorized user on those accounts. By doing this, they each become equally responsible for the account, and if a payment is late it will subsequently negatively affect the credit report and credit score of each partner.
This goes for all joint accounts, no matter if they were opened jointly, or if one partner added the other to the account. It applies to individual accounts where a cardholder was added, joint credit card accounts, joint bank accounts, mortgages, and even utility bills where both parties are listed. Both partners will be considered borrowers, and will both be responsible for settling incurred debts and ensuring payments are made promptly per the terms of each respective account.
The credit of both parties will often be taken into account when applying for certain types of accounts or loans as well. This can have potential implications that can range from mildly inconvenient, like only being approved for a joint credit card account with a low limit or high and unfavorable interest rates, to incredibly expensive, like requiring a large down payment for a mortgage and having an interest rate that results in paying tens of thousands more in interest over the life of the loan.
In some cases, the disparity in credit ratings between the two partners leads to a complete lack of account approvals. Sometimes there is a partner whose credit history is bad enough that no matter how good the other's credit rating is, they still won't be able to get approved for joint accounts. If the account is necessary, this could result in a very uneven burden of financial responsibility in the couple, which can cause high levels of stress and tension, which can lead to other issues.
When You Get Married Do You Share All Debt?
Just like your credit history and your credit score, any debt that you took on before getting married will remain your responsibility. Don't worry, once you get married you will almost certainly create joint debt, but any debt that you accumulated beforehand will remain yours and yours alone. There is one potential danger to that, however, and that is adding your partner to an account that already has debt associated with it, like a credit card with a significant balance or a bank account that is negative and in danger of closure.
If you have credit accounts that consistently carry a balance, and you and your partner were considering adding them as an authorized user, you may want to discuss the potential consequences of that before making your decision. For example, if you have a credit card with a $5,000 limit and a balance of $3,000, the moment you add your partner to that account, they become equally responsible for that $3,000 debt should the account fall into default. Additionally, they become equally responsible for the monthly payments on that balance and the interest it incurs, and if those payments are not made on time, the credit rating of both partners will be adversely affected.
Repairing Credit Before Or After Marriage Can Help Immensely
If you or your partner have credit histories or credit scores that have some damage, it may be prudent to try to fix some of those negative credit items before getting married, or if you're already married before you apply for any type of joint account. The two most popular steps that people take before getting involved in joint accounts are to pay down or pay off debts and to perform general credit history repair.
There are many strategies for paying down debt, with some people starting with the smallest debts and moving to larger ones, often called the "snowball" method. Another tactic is to start with the debt accruing the highest interest, then move down from there. Once some debt is gone and you have some additional money to work with, you may look to clear up old accounts listed on your credit report.
You can often arrange to have negative items removed in exchange for settling the account, just make sure you get any offer in writing before you start making payments and make sure you make the agreed-upon payments, or you'll be back where you started.
Understanding How Credit Works When Married Is Important
Marriage is a big step in the lives of most people, and even though you are taking steps to intertwine your lives on nearly every level, many fail to think about how their financial habits and credit rating may affect their future spouse. This is an important consideration for both parties, no matter which one has the good credit and which one has the poor credit. Knowing how your credit will be linked on joint accounts and through joint debt will help you avoid unnecessary financial stress and hardship.
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Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.