When you get married, your finances can become complicated. However, marriage does not affect your credit for the most part. Your credit score remains your own when you get married and your spouse does as well.
Your big day has come and gone in a blink of an eye. It seemed like just yesterday you got engaged and now your big wedding day has come and gone. Your new life now begins with your significant other! Once you start to get settled in, the thought of you and your spouse’s finances might pop into your head every so often, and for good reason. The way you and your spouse distribute and take care of your money is an integral part of a marriage that can help to smooth out some of the rockiness that comes with initially figuring out your finances as a pair.
Some questions that might come to mind concern how your marriage to your significant other might affect your own credit score. When you get married, does your credit score merge with your spouse’s? If your spouse has poor credit and you have good credit, will it affect your good credit score? If your spouse has credit card debt, are you immediately responsible for their debt as well? Does changing your name impact your credit? Should you merge your credit accounts when you get married? These are all very valid questions that you might be wondering if you just got married.
To start, getting married does not immediately affect your credit in any way. You and your spouse each have your own individual credit scores before you get married, and it will continue to be that way after you are married. If you have a credit score of 500 and your spouse's credit score is 750, you will still have a credit score of 500 and your spouse will still have a score of 750. When it comes to your credit, there are no changes to your account just because you got married. However, you may choose to do things like share a credit card or cosign a mortgage loan which can affect both of your credit scores. Because differing credit scores between you and your spouse can affect you financially in decisions like these, it is important to be more informed about them before you make any big financial decisions. Let's dive a little deeper into credit and credit scores once you get married.
If you are not changing your last name after you get married, skip this section and continue reading!
While updating all of your accounts and addresses to reflect your changing of your last name can take a lot of work, you at least do not need to worry about it affecting your credit score in any way. Again, getting married does not immediately change your credit account in any way. Changing your name will not make the credit bureaus think that you are an entirely new person. Changing your name should be a seamless process when it comes to your credit account and you do not need to worry about any dramatic changes occurring.
While you should not necessarily be picking your spouses based on their credit score or leaving them at the altar if you find out they have bad credit, being transparent about your credit scores with your spouse should definitely be discussed. While your spouse having a bad credit score will not affect your own credit score right off the bat, it can affect some of the financial decisions you may together make down the road. Again, please don’t dump your significant other because Possible Finance told you it might affect a theoretical decision down the road. Simply be aware of the effects a bad credit score between you and your spouse may have!
The main situation where marrying someone with bad credit could come into play is when you and your spouse become a joint account holder when applying for some sort of financing, whether it be an auto loan or a line of credit. If you are applying for a loan or credit card on your own, your spouse's credit score will not come into play. If it is a joint account you are applying for, it does.
For example, if you have a better credit score than your spouse and you both jointly apply for a credit card, your spouse’s poor credit score could come into play when the lender decides to lend to you or not. Your potential lender may see that your spouse has a bad credit score and will not be convinced that you and your spouse will completely be able to make payments. Likewise, even if you do get approved for the loan or credit card, you may find you are being charged an, unfortunately, higher interest rate t due to your spouse’s low score.
On the flip side, your good credit score could help you and your spouse get approved for a loan or credit card that your spouse otherwise would not have qualified for. While your good credit score could certainly help to quell some of the hesitations a lender might have, your spouse's bad credit score can also prevent your joint application from being approved.
When successfully having a joint account of some sort, there are some changes that could potentially occur for your credit score. Let’s look at them quickly.
Let’s get the bad news out of the way first. When you run a joint credit card or loan account with your significant other, you are both responsible for making payments on that account. While there are hopefully no issues with this, you or the other spouse may struggle to make payments and could force the other spouse to make huge payments.
Similarly, if you both fail to make a payment on the credit card or loan account, your score will be negatively impacted just as it would have been if you failed to make a payment when you were single! Late payments and default payments will hurt both you and your spouse's credit cards simultaneously.
While we obviously hope this never happens, there may be an instance where there is some confusion about who makes what payments on what accounts. Likewise, one spouse might have a joint account that the other spouse is not exactly aware of. In situations like these, if you and your spouse have any sort of joint account that fails to make a payment on time you will both suffer the consequences and your credit scores will take a big hit.
While having a joint loan account may seem like it brings twice as much pain if you miss a payment, having a joint account can really have some benefits as well. For example, having two people make payments on the same account can really make making the payments in full much easier. If one spouse is struggling to make payments, there is a likelihood that the other spouse can step in and cover the amount so that no one's credit takes a hit.
Likewise, consistently making payments in full and on time can build both you and your spouse’s credit at the exact same time. Any credit history that is built as a result of the joint loan account will provide the same benefits to both of you, notwithstanding bad credit history. As you can see, having a joint account is both easier to pay off and also reaps double the rewards!
If your spouse has a bad credit score and it is affecting your financing options or they simply want to boost their credit score, having a second partner to help with accounts can be a great way to do that.
One method of utilizing your partner to help build your credit score is by becoming an authorized user on one of your partner’s accounts. An authorized user is essentially a person that is able to use the funds on the account as well as being able to help pay the debt but not being obligated to do so. Being an authorized user on an account that consistently makes successful payments can improve the credit score of the authorized user of time.
For example, let’s say you have a credit card account that you have not missed a payment on since you opened it. Over time, this account has really helped you to build your payment history and it has positively impacted your credit score as a result. Let’s also say your spouse has a really poor score and is looking to improve it. You, the owner of the amazing account, could add your spouse as an authorized user to the account. This account will then show up under your spouse’s credit report. While they theoretically could help make the payments, they are not required to pay back any of the debt (they can also have access to the credit card or loan money as well). Any time you make a payment on time on your account, the lender will report the good payment to the credit bureaus for both you and your spouse. Over time, the authorized user builds credit alongside you.
Successfully making payments helps them just as it helps you. Doing this over the course of a few years can really make a positive impact on your spouse’s poor credit score. Note that if you close the account or remove your spouse as an authorized user, the account will disappear under their credit report and they will no longer reap the benefits of being an authorized user.
Similarly, another way you could help build your spouse’s bad credit is by guaranteeing a secured credit card or loan amount for your spouse. As you may know, lenders are less convinced that people with poor credit scores will be able to pay off their loan or credit card. As such, they may want a borrower with bad credit to get a secured loan, which requires the borrower to put up some sort of collateral for the loan. If the borrower defaults on the loan, the lender is able to take whatever was put up for collateral.
Likewise, having someone else guarantee the borrower’s loan helps to appease the lender. Having an additional person guarantee the loan means that they will be responsible for paying off the loan or credit card should the initial borrower fail to do so.
If your spouse with poor credit just cannot seem to get approved for a loan or a credit card, guaranteeing a secured loan or credit card can really help to better your spouse’s chances of getting access to debt. Once they do successfully get this debt, they need to continually make payments on time so that their credit score can be built up.
When you get married, your partner’s debts do not immediately become your own debts unless you decide to take them on. If your partner has a lot of student loan debt when you get married, for example, you will not be responsible for that debt unless you decide to do so. However, most couples in marriages tend to assume a partner’s prior debts together so they can both help to pay them off. In this case, the debt accounts that you and your partner choose to both pay off will become shared debt.
While sharing debt is extremely common across the country, many states have different legislation when it comes to sharing your debts with your spouse. Some states practice the law of ‘community property’, which allows individuals in a marriage to consider themselves equally responsible for all debts that are accumulated through the course of their marriage. While couples in these states are not required to opt into ‘community property’ residents in Arizona, Alaska, California, Texas, Louisiana, Washington, Idaho, Nevada, New Mexico, and Wisconsin give their residents the choice to do so. Opting into community property would mean that any debts taken on during marriage are shared and both parties are equally responsible for them. Even if one spouse racks up debt without the other one knowing, the unknowing spouse is still obligated to pay for that debt. The rest of the states do not follow community property. Instead, they follow the common law which holds that individuals in a marriage can have their own debts, but can also have joint debts with their other spouse if they choose to.
Wherever you live, you do not assume your partner’s debts unless you decide to. By opting in to ‘community property’ in the states mentioned above or by agreeing to jointly take on your partner’s debts, you agree to share the debt.
Merging your accounts is an important decision that can have major implications down the road in your marriage. So what should you do?
As we mentioned earlier, joining many of your accounts can make the accounts much easier to pay, and it can really do wonders for your credit score if you and your partner are constantly making all of your payments.
Likewise, merging your accounts can make tracking your finances extremely easy. Having all of your information and balances in one place and being monitored by two people can really help to organize your finances. Splitting up the various loan payments, credit cards, and other debts can be a headache and may result in some missed payments here and there.
Combining accounts can really help you in terms of organization. On the darker side of things, having merged accounts makes the splitting up of property and debts much easier in the instance of a divorce.
Ultimately, it is up to you and your spouse whether or not to merge your accounts. Ensure that you are properly informed so you can make the best decision for you and your family.