If you’re planning on taking out a mortgage or other large loan with your partner, talk about your credit scores before you apply.
If you’re married or in a serious relationship, it’s time to talk about your credit. Marriage doesn’t change your credit: You won’t get a joint credit score. But as your finances become intertwined, your partner’s credit score can still affect you.
What happens to your credit score when you get married?
Each person has their own separate credit score, and getting married doesn’t change that. You won’t have a joint credit score with your spouse. This does not mean, however, that your score is not important or relevant to your life after marriage. While there is no joint credit score, there is joint credit that married couples may – and often do – share. Mortgages are the top of that list of course, but you may also have car loans or credit cards in both of your names. If you are joint account holders, both of your credit scores will be taken into consideration.
That’s why it’s a really great idea to share your credit reports and scores with one another long before you start sharing financial responsibilities. While this is probably not first date material, I strongly suggest having this conversation once you get serious – definitely before you get married. If you have less-than-stellar credit your significant other needs to know and vice versa. This will give you a chance to talk through steps you can take to correct any issues you have and strengthen your credit.
See related: Building a mortgage-worthy credit profile
Are both spouses liable for debts?
Unless you both signed up on a joint credit application, your liability for the other’s debts depends on where you live. If you live in a community property state you will probably be liable for debts acquired during the marriage. In community property states, even if an account is only in one person’s name, both parties could be responsible for the debt whether they knew about it or not.
What to do if your spouse has bad credit
Once you talk about it, you will be able to take action. If the problem is late payments, work together to figure out a system to get bills paid on time, every time. Payment history makes up a whopping 35% of your total FICO score, so getting back on track with positive payment history will be a great start in rehabilitating your spouse’s score. If the problems are more serious, like accounts in collections, calling a nonprofit credit counselor is a great place to find affordable professional help.
Why it’s good for both partners to have good credit
When the time comes to apply for a mortgage or make another large purchase, you best chance to get the best terms is for both partners to have good credit, since a lender will likely pull both reports during the mortgage application process. The same might be true for renting an apartment and getting insurance.
Here’s how that process works. The party extending credit will check credit scores for both parties. If more than one credit report is pulled and scored for both people, the lender typically will focus on the median score of each person. Lenders will generally then use the lower of the two middle scores to determine the rate and terms of the loan.
So if your median score is 720, but your partner’s is 675, lenders will likely use 675. However, if one of you has an income large enough to qualify for a mortgage on your own, the mortgage could be in only one name (unless you live in a community property state). If you don’t live in a community property state and the mortgage is only in one name, I suggest putting the deed in one person’s name too. Given the current divorce rate, having only one party responsible for the debt but both parties sharing the equity seems inequitable to me.
See related: Collaborating with your partner on the finances
Just like in other aspects of your relationship, it’s important to be honest with each other about your credit and your finances. This allows you to work together to build your best future.
Remember to keep track of your score!