Married to Bad Credit?

If you didn’t get a chance to talk about finances and credit before marriage, or if your spouse stumbled into some credit damage during the marriage, all is not lost. Arm yourself with the knowledge needed to protect your personal credit score as well as help your spouse get back on the right track.

Credit profiles don’t marry

Does getting married affect your credit score? In a word, no. When you marry, your two credit profiles do not merge. Each person retains his or her own credit file and credit score, and continues to do so. Marrying someone with bad credit will not drag your credit score down. Likewise, marrying someone with great credit does not elevate your own.

How does my spouse’s credit affect me?

Literally, a spouse’s individual credit does not impact you at all. The only likely change in a newlywed’s credit file is an updated last name change, usually the wife. Furthermore, if the two of you maintain separate financial lives there will be no effect whatever on either person. But like all things in complex relationships, a spouse’s association with credit can help or hinder down the line.

Joint applications

The spouse’s credit profile comes into play when a couple enters into a financial transaction together. When it comes time to buy a home, for instance. Applying as a couple significantly strengthens loan eligibility, paving the way for two to buy more home than either one could afford alone. However, if one spouse has no credit or bad credit, the likelihood increases that the couple will be turned down or offered less favorable terms.

Joint accounts

Another way that a spouse’s credit is affected in a marriage is that once both names appear together on an account, payment history and other account details affect the credit standing of both people. It doesn’t matter to the creditor which of the two agreed to pay the bill. If that person falls behind on payments, both of them suffer hits to their credit worthiness.

Credit invisibility

Some lose their credit standing during the marriage simply by doing nothing, allowing all financial matters, including credit accounts, to be handled by the other spouse. If a consumer’s credit file lists few or no accounts, credit bureaus will have insufficient data on which to base a score. This results in a “thin” file and is not uncommon among nonworking spouses.

When to have the credit talk

Discuss finances and credit early in serious relationship. While you can’t truly control another’s financial behavior, you do need to get an idea of how your partner handles money and debt. When only one of you is a saver, frustration and feelings of weak support toward mutual financial goals can root and fester.

Each one must understand the other’s perspective on money management, and the two should agree on how resources are managed. Even if you don’t plan to buy a home together, pricey expenditures inevitably arise. What if the car breaks down and only one partner has the money for repairs or the means to buy a replacement? The burden of financial support inevitably falls on the more frugal partner. How will you set aside money for a vacation if one of you is stuck in a cycle of late fees and interest charges? Can you buy new appliances when needed?

In these examples, all of the choices are negatives. What to do? Bail out the spender who has no financial safety net? Risk enduring resentment? Split up?

How to help improve your spouse’s credit score

If you are in a relationship with someone who needs credit improvement, it’s easy to help. Remember, credit isn’t about having wealth. It’s about proving that you are creditworthy so that when you need financing, you can get it.

Spread out the credit

In the case of a thin file, simply put a couple of accounts into that spouse’s name and pay the bills on time. That person’s credit will show marked improvement in as little as a few months. Ways to put your spouse’s name on accounts include:

• Open a new account in your spouse’s name (some creditors will allow you to transfer an existing account)
• Add your spouse as a joint account owner (this may require an application for a new account). Your spouse and you will then be equally responsible for any debt on the account.
• Add your spouse as an authorized user on one or more of your accounts. Your spouse will have access to the account, and the account will show up on his/her credit report. Your spouse will NOT have any responsibility for the debt on the account. Note: Some creditors do not consider authorized user accounts when determining creditworthiness.

Shape up in two steps

Set an example and communicate openly about financial habits and strategies.

(1) If your partner has struggled in the past with paying on time, set up automatic payments so that due dates are not missed.

(2) Debt problems? Pay off collection accounts. Set a budget together, and review spending weekly to stay on track and avoid overspending.

Work together

Is it your job to help your partner pay off debt that was accumulated before the marriage? I believe it is. Marriage is a partnership for life and the relationship will be more cohesive over the long term when you tackle challenges together, rather than maintain and defend a division.

The more important question: is your partner willing to learn and grow? Can some of your healthy financial management skills and strategies be learnt, so that the two of you can move forward financially as a couple and achieve goals together, without one partner sabotaging the plans? If the answer is no, there are bigger problems in the relationship than money.