This post is sponsored by Lexington Law.
Millennials are mostly past the new graduate phase, which means we are getting married in droves. Most of us think through the details of the wedding, moving in together, and planning our new lives together, but did you ever stop to think how your spouse-to-be will impact your credit score?
If you are anything like me, your social media feeds are filled with friends getting married, having kids or getting a dog. I’m not one to complain about this because I love seeing my friends enjoy the new seasons of life.
When I was engaged to my now husband, we had many conversations about money. Whether it was the wedding budget, rent, expenses, etc., we put the effort in to make sure we were on the same page and set up for success. He is a financial planner, so making sure we were both focused on the same financial goals was absolutely a priority for him (and for me)!
One thing we absolutely overlooked was how our marriage would impact our credit score. Thankfully we both had a pretty good handle on our money going into the relationship. We were honestly so young when we got married, we had barely even started making payments on our student loans, so we didn’t have much time to tank our score to begin with.
If you are single, dating, or engaged, it’s important you understand what does and does not impact your credit score as it relates to a potential spouse! If you are already married, read on because you may learn something that could help you later on or help a friend!
Will Marriage Change My Credit Score?
Depending upon what your credit score is today, this will come as either good news or bad news. According to Experian, if your soon to be spouse has a bad credit score, marrying them won’t change your credit score. This is good news for you!
Your credit score will never be combined. It will always remain in each of your separate names.
Don’t celebrate too soon though, there is some bad news. What will change your credit score is if you open a joint account together at any point. You and your spouse’s financial decisions on that account then impact your credit score, regardless of who is actually using that account.
Think carefully before opening joint accounts if one of you has a bad credit score. It may be wiser to have that spouse focus on making payments on time and repairing their credit before opening a joint account.
How Does A Spouse Impact My Credit Decisions?
Your credit score is really only an indicator of your overall credit worthiness. This impacts your ability to obtain a mortgage, loan, or other type of credit. Generally speaking the terms of your credit agreement, such as interest rate, loan amount, and term, can be more or less favorable depending upon your credit score.
Your spouse can’t change your credit score just by getting married, but future credit decisions you make together, such as buying a house or car in both your names, can be heavily influenced by a poor credit score in one spouse. Higher interest rates or even being denied a loan are both possible, according to The Balance.
In fact, mortgage lenders will check both of your credit scores if you have submitted a joint mortgage application. A poor credit score in one spouse may cause you to take out the mortgage in the name of the spouse who has the higher score. If you choose this route, you will only be able to get approval on a loan amount based on that spouse’s salary, not your joint income.
How Does Divorce Impact My Credit Score?
I don’t think anyone gets married with any thought of someday getting divorced. The reality is, though, that even though the divorce rate among young adults has dropped over the past couple decades, it’s still relatively common for couples to experience divorce.
If you find yourself facing this situation, it’s good to know what impact divorce can have on your credit score and credit accounts.
Experian recommends that you take inventory of all shared accounts and credit responsibilities with your ex-spouse. Once you have an idea of all the credit cards, car loans, bank accounts, mortgage(s), etc. that are listed in both of your names, work to separate these into each person owning accounts they are responsible for.
Until you finish removing the appropriate spouse from all accounts, you are both responsible for making payments on those accounts. For example, if you have a joint mortgage and you moved out of the house, but your spouse stops making payments, you are legally liable for the payments until the credit is changed to just their name.
As ugly as some splits can be, making sure you are both carefully reviewing accounts and finances will help ensure that you both start your new chapter on the right foot.
One of the toughest parts of divorce is that your credit score had been shaped by joint accounts previously and that history carries over into your lending decisions for at least the short-term. Establishing your own account and making payments on time will help you quickly set up your credit score to a comfortable number.
If you haven’t recently checked your credit report, you can get a free copy of your TransUnion report from Lexington Law. One of the quickest ways to repair your credit score is to make your payments on time. However, if you have negative marks on your credit report that you aren’t sure how to remove or repair, contact Lexington Law for help.
Addressing your credit report and work that may need to be done to improve it can seem overwhelming, but it doesn’t have to be. Getting help to repair it or taking positive steps to improve it now can help you whether you are single, engaged, or married.
This post is the second of four summer #adulting series posts, which will walk you through what you need to know in order to take care of your financial health.
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