What happens to your credit when you get married? If your spouse has good credit, does that help yours? If your spouse has bad credit does that negatively impact you? These are questions that I often hear when I am out teaching classes. The answer is pretty straightforward; however there are many things to think about when combining finances with someone whose credit has blemishes.
First, let's put some misconceptions to rest. When you get married, your credit does not become one. It is still separate. The debts that were yours prior to the marriage are still your responsibility and they will not show up on the credit report of your new spouse.
There are only a few ways for you to become responsible for the prior debts of someone else. Those are:
Also, when you marry, your credit reports remain separate. If you pull your credit report you will see only accounts that you are responsible for repaying. This may include accounts in which you are a joint (or co-signer) account holder. However, if you apply for a joint account (credit card, car loan, mortgage, etc.) the financial institution will look at both of your credit reports.
Now, let's look at what happens when you get married and one spouse has less than perfect credit. The first hurdle is what to do when you want to purchase a home or a car. The spouse with the negative credit may be left off the loan application (if their income is not necessary to purchase the item), meaning they may also be left off of the title. In the case of a car, it may not be that frustrating, but when it comes to your home, you definitely want to be included on that title and you will be able to afford a more expensive home if the income of both parties is considered. If the application must include both spouses, you may be declined for the loan if one person's credit is too negative.
So what should you do when if one partner has bad credit?
Our credit is important to our financial health in so many ways. It impacts the interest rates we are charged to buy a home or a car, how much of a deposit we will have to pay on utilities or rental properties, our insurance rates, employment opportunities and much more. It is important to protect this valuable asset. If you or your partner needs help managing their debts, call a certified credit counselor today. Start your new life off with a plan for paying your debts and achieving financial freedom.