Joint Credit
After you say, “I do,” many things change in life, especially in the areas of what you and your new spouse will share together. You will share a bed, a bathroom, the TV remote, family holidays – but what about credit? Many young couples assume that when they get married they will have a merged credit report. However, this is not the case. Every credit report and credit score is tied to an individual via a single Social Security Number. This means that your and your spouse’s credit reports will forever remain separate. How does this affect you?
The first thing that every newly married couple needs to understand is how a spouse’s credit score measures up. If you have good credit and your spouse does not, it is incredibly important to understand how this can affect joint purchases that you plan on making (e.g. a new car or home). It is also important to protect your own credit while taking appropriate steps to build better credit together.
Lenders will use credit scores from both spouses to decide whether or not to extend credit to joint applicants. If you have good credit but your spouse does not, your request for credit is likely to be denied because bad credit is considered to be a high liability. If your request for credit is approved, it is very likely that you will have to pay a higher interest rate for a loan than those with good credit. This is why it is often advised that only a spouse with a good credit report apply for a loan, and not to seek joint credit. This may mean that you will not receive a loan for the most desired amount, thus causing you to downsize a purchase. However, in the long run it will save you money, and it will allow you to further increase your own credit score. This can also give your spouse time to get his or her credit score time to increase by making wise decisions and eliminating debt.
Joint credit bonds people together for life, no matter how their marital status evolves. Married couples (and those who are not married but choose joint credit) should always be cautious before signing a joint credit agreement. Unemployment, medical bills, unforeseen life events, and debt can all make it difficult to build good credit – and can all negatively impact your credit score. Take the time to fully understand your spouse’s credit score before you apply for joint credit. If divorce were to occur, your joint credit would still affect your financial future.
