While your finances might not be the first thing that springs to mind as Valentine’s Day approaches, your credit can be affected by your partner’s history and spending habits. Credit counselors advise couples to sit down together and disclose their respective debts before they get serious. That might not sound like the most romantic date night, but the potential impact on your credit will last much longer than chocolate hearts and flowers.
1. Matrimony doesn’t wed your scores, too. It’s a common misconception, but getting married doesn’t combine your credit scores. According to website CreditKarma.com, “Your bank and credit card accounts won’t merge once you’re married. But keep in mind that if you open a joint credit card, the account activity will be shared on both of your credit reports.” In other words, if one of you misses a payment on a joint credit card, both of your scores will suffer.
2. A spouse’s debts can torpedo your score. If both of your names are on a credit card account, car loan or mortgage, a lender will come after both of you if payments aren’t made, regardless of who’s supposed to be responsible. Even if you haven’t co-signed and your spouse defaults on his or her debts, you’re fair game for collectors if you live in what’s called a “community property” state, which are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
3. You still need income to get credit in your own name. Regulatory changes mean even if your partner has a good job, your income is what matters if you’re trying to get a credit card. Federal Reserve rules that kicked in last fall stipulate that only an individual’s income can be used to determine their creditworthiness. Previously, lenders looked at household income, which meant that a stay-at-home spouse could still get a credit card solely in his or her name. So if you’re planning to leave the work force, keep at least one credit account solely in your name.
4. You can give a partner with a poor score a boost — but do it carefully. “We’ll often have people that are going to become married and they’ll say, ‘My spouse has poor or no credit,’” says Melinda Opperman, senior vice president at nonprofit Springboard Credit Counseling. In this case, the partner with the good credit has a couple of options. “You can make them a joint account holder or an authorized user on a credit card,” she says. “Your credit score is going to help them tremendously to increase their score.” Going the joint-account route will mean opening up a new account, so don’t do this right before you’re planning to apply for a big loan like a credit card or mortgage. You can apply for a joint credit account with them, or make them an authorized user on one of your existing credit cards. This option is also a little riskier; if an authorized user runs up a big bill, you’ll still have to pay it, but you can kick them off the account without having to close it entirely.
5. You can’t average away a partner’s poor score. If you’re applying for credit jointly, the lower partner’s score often will dictate what kind of rate and terms you get. Lenders have some discretion if partners come in with very different credit profiles and may consider both scores, but they won’t average them together. In other words, there’s no way to completely camouflage a horrible score. According to Barry Paperno, consumer operations manager at MyFICO.com, “When one score for each borrower is obtained by the lender, such as in credit card and auto lending, a minimum score requirement exists for the lowest of the two scores.”