Here are five credit facts every couple should know:
- Matrimony doesn’t wed your scores. It’s a common misconception, but getting married doesn’t combine your credit scores. What it will do is affect you if you go in together to apply for a credit card or loan. Your account activity will be shared on both of your credit reports. In other words, if a payment is missed on a joint credit card, both of your scores will suffer.
- A spouse’s debts can torpedo your score. If both of your names are on a credit card account, car loan or mortgage and payments aren’t made, it will show up as bad, delinquent credit history, regardless of who’s supposed to be responsible.
- You still need income to get credit in your own name. Regulatory changes mean even if your partner has a good job, your income is what matters if you’re trying to get a credit card on your own. Federal Reserve rules that kicked in last fall stipulate that only an individual’s income can be used to determine their creditworthiness. So if you’re planning to leave the work force, keep at least one credit account solely in your name.
- You can give a partner with a poor score a boost – but do it carefully. The partner with the good credit has a couple of options. You can make your spouse a joint account holder or an authorized user on a credit card. Going the joint-account route will mean opening up a new account, so don’t do this right before you’re planning to apply for a big loan like a credit card or mortgage. You can apply for a joint credit account with them, or make them an authorized user on one of your existing credit cards. This option is a little riskier; if an authorized user runs up a big bill, you’ll still have to pay it, but you have the option of removing them from the account without having to close it entirely.
- You can’t average away a partner’s poor score. If you’re applying for credit jointly, the lower partner’s score will often dictate what kind of rate and terms you get. Lenders have some discretion if partners come in with very different credit profiles and may consider both scores, but they won’t average them together. In other words, there’s no way to completely camouflage a horrible score.
So, while you’re discussing the flowers, the cake, the honeymoon destination, set aside some time to talk financial status and respective debts. It could save you a lot of marital headaches and heartaches down the road!
(Source: www.moneyland/time.com.)
Equal Housing Opportunity Lender