Does marrying someone with bad credit affect my credit score?
A credit rating is an assessment of an individual's creditworthiness. This evaluation is based on an individual's history of borrowing money and repaying debts. A person's income and availability of assets also affects the credit rating or score he or she receives. When an individual wishes to secure a mortgage or car loan, he or she must have a sufficient credit rating. If a person is unable to demonstrate an ability to repay debt, his or her request for a loan will be denied.
Married couples generally maintain two separate credit records and histories. However, if you decide to take out a loan with your spouse, all payment history from then on will be recorded on both credit reports. When creditors generate reports, they are required by law to report information on a joint account in both of the account holders' names. It is important, therefore, that couples discuss their financial positions before getting married. Being aware of your spouse's credit history can help to maintain a healthy financial position after marriage and reduce financial strain.
Once you get married, it is also imperative that each of you have your own separate checking accounts and credit cards. This way you will be able to sustain your own active credit record. If there are long periods during which you do not have any credit history, you will not be able to take out loans by yourself. Both you and your spouse should make sure that you pay your bills on time because late payments are the fastest and easiest way to destroy your credit rating.
Although your spouse's bad credit rating may not affect your individual credit score, if that person continues to be irresponsible about debt repayment, both of you may suffer if you maintain a joint account. However, there are several actions you can take to protect your credit rating. For example, do not sign joint agreements, limit authorized users and keep checking accounts separate. These recommendations will help you to keep control of your finances and preserve your good credit.
It’s not the act of marriage but how you deal with the assets after you are married that could potentially affect your credit score. What do I mean by that? As long as you two have separate accounts, one person’s bad credit history will not affect the other spouse’s good credit score. It’s like having a kid who got the cold from the school. Will his cold give you a cold? It depends. If you have a good immunity & keep a good personal hygiene, not to touch everything the sick kid touches, you may be fine. Same analogy applies here. The minute you comingle your assets, such as having a joint account or applying a joint credit card, you may risk your stellar credit history being tainted if the other spouse misses another payment. Thus, the prudent thing to do is to initially maintain separate financial accounts and coach the other to learn personal finance and gradually improves his/her credit score. Only then, have a joint account. Best luck!
It shouldn't. But it could if you get added onto any of your spouse's loan accounts that also happen to have a bad credit rating. But even though your credit may be golden, it can be tough to apply for credit jointly since your spouse's credit will also be considered. An example is a mortgage. If you need both paychecks to qualify for the mortgage, the lender will look at both credit profiles. And unfortunately, they will use your spouses credit score as the primary in underwriting your loan. That's because they use the credit score of the spouse who has the lower score.
You might also consider that your spouses bad credit may force you to be the sole holder on any loans. That can include a car loan or credit card, as well as a mortgage. Unless your spouse's credit improves, then overtime you will be the one carrying most of the debt.
Tying the knot alone does not affect your credit score but all that changes the second you start applying for credit together and opening joint accounts. Keep in mind there is no such thing as a joint credit score but rather; lenders will look at both credit scores when evaluating a loan application.
Let’s look at a hypothetical but very real example. You and your spouse, now happily married and living on two incomes, want to buy a beautiful Cape in the next town and approach the bank for a mortgage. An inquiry into your spouse’s credit reveals a low FICO score of 600, considered bad credit to most insurers while yours is excellent at 720. Much to your surprise the bank denies your joint mortgage application and you’re crushed. Why? Generally speaking, both borrowers must be able to qualify or no deal. Recent data from Experian supports this – a third of married couples said their spouse’s credit score has impacted their ability to secure a home loan.
What about saying, “I do” to your spouse’s last name but not the credit score? Fortunately, this would have no impact on your own individual credit score whatsoever, so long as you’re not applying for any future credit together. Additionally, notifying the credit reporting agencies of your new name change is good housekeeping and won’t bring down your credit score either.
So go ahead, you have my marital blessing to be crazy in love but remember, good financial decisions should be made with your head not your heart.