While you’re getting ready to share your life with the one you love, the last thing you want to do is talk about your bad credit score. But to make sure you and your significant other don’t face any unpleasant surprises down the road, it’s important to take time to sit down together to have “the money talk” and get a better understanding of how your credit score will impact your life together. Even if you’ve already tied the knot, the same issues are present.
You might have bad credit for a number of reasons — maybe you made some poor financial decisions in the past or struggle to make your credit card payments on time. Or maybe you simply have no credit history at all. Whatever the cause, it’s important to be open with your spouse-to-be about your score and how this could impact your ability to get a loan.
If you’ve recently gotten engaged, you might be wondering, “What happens to my credit score when I get married?” First, be assured that your spouse’s credit score doesn’t change your own — for better or for worse. But when you go to buy your first home or get a line of credit, each of your scores will be considered by your lender, which might make it hard to secure a loan together.
Whether you’re about to get married or have been married for a while, here’s a look at some common situations you and loved one might find yourselves in and what you’ll need to consider finance-wise as you handle them.
Co-signing With a Good-credit Spouse
If you have a bad credit score, you’ll likely need to secure a co-signer with good credit before you can borrow money for large purchases such as a car. The co-signer will be responsible for paying off the loan if you fail to make a payment.
If you and your spouse are sharing finances, having your good-credit spouse co-sign on your loan might sound like a no-brainer. However, keep in mind that each signature takes on the full burden of the debt. If one spouse isn’t making payments, the other will be fully responsible — even in the event of divorce. Consider the seriousness of the agreement before you both pick up a pen.
Effects of Opening a Joint Card
When you open a joint credit account with your spouse, that account’s credit history will appear on your credit report as well as your spouse’s. If you fail to make payments on a joint account, your spouse’s score will suffer, too.
Many couples opt for a joint card as a way to share their finances more effectively. If you feel confident that you can keep the account in good standing, opening a joint card might be a great way to improve your credit score. But if you know you’re not reliable when it comes to making payments on time, you’ll want to communicate that to your spouse and ensure that they’re able and willing to take charge of the monthly payments.
Securing Future Loans with Your Spouse When You Have Poor Credit
Securing a large loan, such as a home mortgage, is a big challenge when one person has a bad credit score. Many lenders consider each person’s credit when determining what interest rate to offer, and an extremely low score could prevent you from getting any financing at all.
Your bad credit score doesn’t have to prevent you and your loved one from buying your dream car or home, however. Before applying for a loan, talk to your spouse about applying for a single-applicant mortgage. Lenders might approve your good-credit spouse for a low-interest mortgage even if you don’t qualify for a mortgage together.
If a single-applicant mortgage isn’t an option, you can try to improve your credit score or make yourself more attractive to lenders by lowering your debt-to-income ratio, improving your debt repayment history, and making sure your credit report doesn’t have any costly errors that could be needlessly hurting your score. While it might take a while to improve your score, a lower interest rate and a higher chance of approval might make it worth the wait.
How Can You Improve Your Bad Credit Score?
So, how can you improve your credit if you’re worried about limiting your spouse’s borrowing options? There are plenty of ways to work together to overcome this obstacle as you build your future together. Here are some tips that many people use to help pay off past debt and improve their credit:
- Look for any errors in your credit report and take steps to address them
- Sit down together to create a budget and come up with a plan to pay off debts
- Set up automatic payments or reminders to help ensure your credit accounts are paid on time
Check Your Credit Score
If you have bad credit, the last thing you want is to put your spouse at risk. Take the time to understand your situation, so you can be cautious and mindful about making sure the problem doesn’t cause joint issues.
One of the best ways to be mindful of your credit is to check your score periodically. If you’re a PSECU member, we make it easy for you to stay up to date with our free credit score service.* And don’t forget to check out our WalletWorks page for helpful money-management tips.
*PSECU is not a credit reporting agency. Members must have PSECU checking or a PSECU loan to be eligible for this service. Joint Owners are not eligible.