You just got married. But even before the wedding bills are paid, reality starts to set in. You’ve spent several years building up your credit score. Now that it’s right where you want it, there’s another person coming into your financial life. Will your new spouse upset your perfect credit score equilibrium? Short answer: No
Initially, there’s no reason to freak out over what you don’t know. There’s no such thing as a joint credit score, so getting hitched will not automatically impact you or your spouse. Your credit scores will be unchanged when the rings go on. But there’s still a subtle change to be aware of. Even though your individual scores will be unaffected, they will now both be considered when either of you applies for a loan, like a mortgage. Many loans will be attributed to you both, as a unit, so the strength of your score and your partner’s will be considered. This may or may not be a good thing depending on how high or low your credit scores are. In the case where your new spouse’s credit score is disastrously low, consider going solo on the application so that you can achieve a lower interest rate. That will save you both a lot of money down the line. Keep in mind, however, that a big input into your credit score is how timely you are with paying the bills. So if you take out a loan in your own name but find out you are married to a procrastinator who’s continually delinquent, then you end up eating it. On the other hand, if you are married to someone responsible then you may want to consider taking out a smaller joint loan or a joint low apr credit card account, where the interest rate isn’t as important and you can help your spouse build credit.
Before You Get Hitched: While I’m not a marriage counselor, most personal finance experts recommend that couples have the tough money conversations before the wedding conversations. Credit reports for both parties should be discussed upfront and scores should be laid out in the open, so there are no surprises when it’s time to tie the knot and start signing joint loan applications. It’ll save you many headaches in the future if you figure out what the damage is and what can be done to resolve it before you get more financially integrated.
Checking your credit reports for free When it’s time to talk to your partner about your finances, check your credit reports for free at www.annualcreditreport.com, and plan on cycling through the different credit bureau every four months. Couples should also investigate and resolve any inaccuracies in their reports. To get lackluster scores back in order, do your best as a pair to pay down each other’s debts, even if it means getting a credit card for balance transfers that will help you avoid interest charges in the short term. This will reduce your credit utilization and increase your available credit, which accounts for 35% of your FICO scores. This doesn’t mean you should close credit card accounts that are in good standing, or not use them; quite the contrary. Keeping accounts open increases the length of your credit history and shows agencies that you have plenty of different types of credit at your disposal that you’re not abusing. That’s a good sign to anyone you approach for a loan in the future.
The bottom line? Marrying someone with a bad credit score will not hurt your score, but can hurt your access to credit. Be aware of your finances and your spouse’s, and when in doubt, talk to each other. Get clear about what your credit scores are, how much debt you have and – this is the most important part – what you can do to get each other’s credit in better shape for the future. Do this and you will definitely live happily ever after. In a financial sense, at least.
Tim Chen is founder and CEO of NerdWallet.com, a website that helps consumers to evaluate credit card offers. Tim also educates consumers about credit cards and debt management at the Forbes Moneybuilder Blog, the Huffington Post, and U.S.News.