Many soon to be wedded couple are now concerned about the above line. Why so? You can't discuss the financial matter because marriage is a bonding of two souls - this is now a myth. Rather, before saying "Yes, I do", discussing finance related topics like credit standing, outstanding debts, savings, and future goals, are now considered as wise decisions.
What will happen to your credit when you tie the knot?
A marriage will not affect credit score directly, but there are some ways it can affect your financial life.
Here's how:
1. Your partner’s credit history will not appear in your report
The credit history of your partner will not appear on your credit report; neither will your credit history appear on your partner's credit report.
2. Changing your last name will not affect your credit history
Changing the last name after getting married doesn't mean your credit history will be erased and you have to start with a new credit history. If you change your last name and report the changes to your creditors, then you can see some updates on your credit reports. So, it is advisable to check credit reports this time to avoid inaccuracies.
3. Your credit score will be same after marriage
Your credit score will not drop if you marry a person with a bad credit history. Neither will your credit score improve simply because your partner's credit score is good.
4. Lenders can check both of your scores for joints accounts
If you plan to set up a joint account or a joint purchase, then both of your credit scores can be checked.
If you apply for a loan to buy a big-ticket item like a car, mortgage, lenders can check both of your credit reports and/or score before lending you money.
So, couples with bad credit can get more rejections. In case the application gets an approval, the interest rate and fees may be higher than usual.
5. Both of you are liable for debts in case of joint accounts
In case of joint accounts, both the spouses are responsible for the loan payments. If the account gets delinquent, then the lender has rights to collect the outstanding amount from both the spouses.
6. Expect late achievements due to spouse’s poor credit rating
Married couple often build big dreams for the future. Your spouse's poor credit score can delay in achieving big dreams and may require patience.
What should you do when your spouse has bad credit?
Handling finances in a marriage isn't a piece of cake. Sometimes it's become complicated due to many factors. One of the major factors is one of the spouse's bad credit.
However, you need not be worry about it. Taking some steps can help your spouse to build a good credit score.
Read carefully:
Ask your spouse to check credit report
Mistakes on the credit report are quite common; but, it can be dangerous for the credit score. So, you must tell your spouse to review his/her credit report (from each of the major credit bureaus) every year. In case there are some mistakes, dispute them.
Inspire your spouse to get rid of debts fast
Your must encourage your spouse to pay off the debts, especially credit card debts. Because high credit utilization affects the credit score negatively. Ask your spouse to pay off the higher interest debts first. You can follow the debt avalanche method; it works well to pay off the highest interest debt while paying the minimum balance on the rest of the debts. Make sure you don't miss any single payment; otherwise, the credit rating may take a dip.
Automate your spouse's bills to avoid late or miss payments
Remember, 35% of the credit score is based on how the person pays the bill. Late payments or missed payments is one of the major determining factors for the credit score. So, if your spouse often makes late payments, then set up automatic bill payments to avoid such inconvenience.
Ask your spouse to apply for a secured credit card
A secured card is backed by a certain amount of cash deposit. Using a secured credit card will help your spouse to build credit without incurring debts.
Lastly, knowing your partner financially before tying the knot is very important. Thus, you can take proper financial steps without making any blunders.
For example:
If you and your spouse have a different credit score, then you have to be extra watchful when dealing with the credit-based application. You should know when to apply jointly or separately to get the best rate.
Read more:
Why you should know your spouse’s credit score
7 ways to improve credit score while having burden of debt on your back