If you’re planning on getting married soon, it’s important to consider all of the ways your lives will merge, including financially. They say opposites attract, and many people often say that this is especially true financially – with one spouse usually being a spender and one usually a saver. So if your spouse has poor credit, will they bring that into the marriage, and will it bring your credit score down, too?
Here are some important facts about marriage and credit scores that will give you an idea of what to expect:
You will still have individual credit scores
Even though you are legally married, you will still have individual credit reports and corresponding scores. They will consist of your individual financial histories and the content of your spouse’s credit report will not be reflected on yours whatsoever.
Your joint accounts will affect your credit scores individually
If you decide to open a joint bank account or credit card together, your spouse’s spending habits can affect your credit score if their spending is irresponsible. Late or missed payments will show up on both of your credit reports. If a high balance is kept on the credit card, that will show on your credit utilization ratio and can lower your score. It’s important that you talk about your financial histories and habits prior to tying the knot so that you both have a clear picture of how to handle finances and make the best decisions for your marriage and future.
Applying for new loans together will be affected
If you are hoping to buy a home together, your spouse’s low credit score may affect your ability to qualify for a mortgage, as many lenders use the lowest score of the two of you. Even car loans or other loans that you apply for together may be denied based on their poor credit history or score. If you are granted a loan but your spouse has poor credit, you may be faced with higher interest rates or lower limits than you’re used to.
You may need to apply separately for a while
If you or your spouse has poor credit and you are worried that combining finances would mean disaster, then make a plan to improve the situation. Fortunately, you have each other, and one of you already has proven to have sound financial habits and can love and lift the other as they learn to manage their finances better. In the meantime, it may be smart to apply for a car loan or credit card, if necessary, using only the better credit holder’s name. This will allow for better rates while giving your spouse a chance to improve their credit score as you work toward bigger goals, like buying a house. Work together toward improving your spending habits and getting on the same page financially to avoid the stress and pitfalls that come with debt and to ensure a life of financial freedom.