Are you ready to tie the knot?
Congratulations! But before saying your “I Dos”, make sure that you and your partner have already thoroughly discussed both your financial history and records.
This includes reviewing your savings, salaries, investments, and of course, credit.
Now you might be wondering… How does marriage affect credit?
If you’re curious about the effects of marriage on credit scores, this might be the most important article you’ll come across today.
Getting married does not have an impact on you or your spouse’s credit file. However, both of your credit health can affect your future efforts to take a joint loan or shared credit card accounts.
With my 25 years of experience as a financial coach and bank expert, below, you’ll learn that the choices you make about joint accounts and co-signing loans can have an impact on your credit score.
How Does Marriage Affect Credit?
The first thing you need to know is that there’s no such thing as a “marriage credit score”.
Your credit scores and credit histories don’t combine when you get married.
Your credit history and scores are yours, and your marital status is not included in your credit reports.
However, having a shared account or being an authorized user of your spouse’s account can have an impact on both of your scores.
For instance, whenever you apply for credit together, you’ll undergo the process of a hard inquiry from lenders.
A hard inquiry is reviewing your credit to see if you’re responsible enough to be given credit. It will temporarily lower your credit scores but will bounce back through time and positive reports.
If you own a joint credit card account, your scores can be damaged if either of you is late with the payments.
What if one spouse has bad credit?
For you overthinkers out there, no, marrying someone with bad credit doesn’t necessarily mean it’ll also damage your credit score.
However, your spouse’s bad credit can have an effect after you get married.
Lenders can look at both of you and your spouse’s credit when you apply for credit together.
Your spouse’s bad credit can stop you from getting favorable interest rates or getting loan approvals.
But if a person with imperfect credit is applying for a loan, a spouse with good credit can serve as a co-signer on the application.
This means the spouse who co-signs the application will be the one responsible for paying the bills if their partner is incapable.
Tips to Help Your Spouse Build Credit
If your spouse happens to have bad credit, you can help them build and maintain a more positive one to achieve both of your financial goals.
Here are six easy steps that you can take together:
Find The Problem
The first step would be finding out the problem.
Your spouse should get a free copy of their credit report at AnnualCreditReport.com so both of you can review and see where the issue is.
Discuss whether they are overspending, not being able to pay bills on time, or more.
It’s best to be open and nonjudgmental about these things.
Repair The Damaged Credit
Now, it’s time to address the problems.
There are a few common mistakes that can lower a credit score.
If you want to know more, I’ve written an article about the usual missteps people make that can negatively impact credit scores.
Check all collection accounts and amounts and pay them off.
If late payments are bringing your spouse’s score, try installing an autopay.
Also, credit utilization should be lower under 30% of the credit line.
Lenders or banks prefer that you have plenty of available credit and you’re not spending much of it.
Make Your Spouse An Authorized User
Making someone an authorized user will add credit history to their credit report.
Ensure that your card issuer reports authorized users to the credit bureaus.
The primary cardholders should be aware and prepared to have their activity reflected in their credit scores.
For example, if your spouse always pays the bills on time, it can have a positive effect on your credit score since it contributes to your payment history.
However, if your spouse overspends or misses payment due dates, it can lower your credit scores.
Have Your Spouse Apply For A Secured Credit Card
Another great option that can help improve your spouse’s bad credit is to have them get a secured credit card.
With a secured card, you’ll pay a security deposit that will act as collateral for the card issuer to open the account.
Your spouse will still make the payments on the card every month, but the issuer doesn’t think of it as a risk since the bank already has the cash.
Establish And Sticking To The Budget
Establishing and sticking to a budget is a crucial aspect of financial stability.
It will be impossible for you to be stable if you’ll always overspend.
Creating a budget starts with having an honest review of your combined finances.
Start by considering what each of you brings monthly and the essentials that you’ll need to pay each month.
This can include housing, transportation, food, and medical costs.
Will Changing Your Name Impact Your Credit?
Taking your spouse’s last name when you get married does not affect your credit.
However, you should notify your current creditors and the Social Security Administration about the name change.
There’s no need to notify credit bureaus since they’ll update your name on your credit report once your creditors start reporting activities under your updated name.
Once that happens, your previous name will be added as an alias.
Review your credit reports after a few months to check and notify them if they’ve ever updated your name incorrectly.
You can file a dispute with the specific credit bureau to rectify the record.
Taking Out a Joint Loan
Let’s say you’ve decided to take out a joint loan with your spouse. It can be for a house or a car.
Your lender is likely to check both of your credit histories to help you decide whether to make the loan.
If your spouse has a bad credit record and you have enough income to pay the loan payments, maybe it’s best to take out a loan in your name only. In this way, you can even get better interest rates and terms.
When it comes to this instance, two scores don’t mean better than one since one bad score can drag both scores down.
Bad Credit Scores Can Have A Negative Impact When Applying for A Mortgage or Loan
Since both of your credit histories are being reviewed if you apply for a mortgage or loan, your spouse’s credit history can have an impact on the rates or whether or not you’ll get loan approval.
If your spouse has a bad credit score, expect to have disadvantageous interest rates or be prepared to get denied since lenders might be hesitant to extend a loan.
Before making a big purchase like a car or a house, if one of you has a bad credit score, it would be best advised to first improve that bad credit score before making major buys.
This might delay your plans, but it can unlock better interest rates, which will be more advantageous in the long run.
Should You Merge Credit Accounts?
The answer is totally up to you as a couple.
But before concluding, it’s best to have a detailed discussion about your credit histories and payment manners.
Merging credit accounts can either have a positive or negative effect, depending on you guys.
Many couples do this to simplify record-keeping and to make it easier for them to prepare joint tax returns.
Once you’ve merged all your financial accounts, keep in mind that both of you are responsible for all debts in any joint accounts, and a missed payment on a joint account will harm both credit reports, regardless of who missed the payment.
Keeping at least one credit account in your name is advised as a form of protection in case of an emergency.
How Does Marriage Affect Credit: Summary
If you plan to propose soon or soon to be, it’s normal to get curious and learn how marriage affects credit.
Rest assured that your credit scores will not be affected just because you’ve tied the knot.
Both you and your spouse will continue to improve and maintain independent credit reports, histories, and scores.
However, your spouse’s credit score can have an impact in the future when you apply for a joint loan, credit card, or mortgage.
The way you both will treat the shared credit will affect both of your credit scores.
Establishing good credit habits is the best way to maintain a good score.
Even though you can do it on your own, now that you’re getting married, it’s time to put in a team effort with your partner.
Ensure you make on-time payments, lower credit utilization, and regularly review your credit report.