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This post comes from Shelby Bremer at partner site Credit.com.
It’s any spouse’s nightmare. Whether you’re newlyweds or have been married for years, that first glimpse at your spouse’s credit report can seriously put a strain on your happily-ever-after if their credit is a mess.
Your partner’s poor credit history may make it more difficult to qualify for a loan (like a mortgage), and becoming a joint holder on their accounts with debt may knock your credit.
But if you find out that your spouse has a low credit score after you said, “I do,” there still are steps you can take to improve your financial future.
Before you do anything else, you need to get — and stay — in the habit of looking at your credit reports and credit scores regularly. It may not be pleasant if you’re dealing with bad credit, but it’s important to stay informed on all of the details of your credit so you can work toward a better credit score. You can pull your credit reports from each of the three major credit reporting agencies for free once a year using AnnualCreditReport.com, and can monitor your credit scores for free once a month using Credit.com’s Credit Report Card.
Credit report support
It’s important to remember that your individual credit reports are maintained separately, and getting married in and of itself doesn’t factor into your credit score. However, if you decide to become a joint account holder on your spouse’s account, any late or missed payments, even if they’re from before you were together, show up on your credit history as well. When you are joint account holders, you agree to share full responsibility of any debt.
This is why Credit.com’s director of consumer education, Gerri Detweiler, recommends that you “consider whether you are better off getting credit on your own while your spouse rebuilds his or her credit.”
One way to help lift them to financial health is by adding them to one of your pre-existing accounts as an authorized user. That way, Detweiler says, “the account will likely appear on their credit reports and they should benefit from the entire account history.”
She recommends that you “choose a credit card with no revolving balance, a perfect payment history (no late payments) and one that has been open for a long time in order to get the maximum benefit from this strategy.”
Dealing with bad credit
When it comes time to apply for a joint account together, according to Experian, lenders “take both credit histories into account when reviewing joint applications, so those late payments could affect your ability to qualify.”
With mortgages, for example, Detweiler reveals that “the lender is likely to use the lower of the two middle scores when determining the program and rate for which you qualify” — middle score being the middle of your scores from all three credit reporting agencies. Even if you do qualify together, your fees and interest rates may be considerably higher.
Many experts recommend that for couples with significant debt, delaying joint home buying until the debts are more manageable and both credit scores are at a stable level is a smart choice. Another option is to apply individually, but keep in mind that adding your spouse later on typically requires refinancing.
Regardless of the steps you choose to take, it is always beneficial to budget your household and keep each other accountable for paying bills on time. Having open and honest communication to build strong financial habits is crucial. Marriage truly is a partnership in so many ways, and you need to work together to ensure that both your credit histories are as impeccable as can be.
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