So you’re tying the knot! Do you know how getting married affects your credit score?
When you get married, a lot of things change financially. You may choose to combine your finances. You may get a discount on your car insurance when you combine policies. If you don’t already have kids, your tax burden gets a little bit lighter. Marriage can also impact your credit score, but not necessarily in the way you think.
Give Your Spouse Credit — Or Don’t
It’s a myth that when you get married, your partner’s score will automatically affect your own. That’s simply not true. When potential lenders run a credit check on you, your spouse’s numbers have zero impact on your own.
There is no such thing as a joint credit score, and any negative line items from your partner’s past will not show up on your credit report.
So Then How Does Getting Married Affect Your Credit Score?
Your spouse’s past does not impact your credit score, but their money habits are likely to impact your financial future. In fact, you don’t even have to be married to see this trend.
If you are cohabitating, whether it’s with or without a marriage license, studies suggest your scores drift closer together over the course of your relationship. The partner with the lower score is likely to see a boost, while the partner with a higher score is likely to see a decline.
I’ve seen this in my own relationship. While my husband and I both started out with extremely competitive credit scores, his was slightly lower than my own. At one point in our relationship, we transferred a small amount of credit card debt he was carrying onto one of my zero-interest cards. We saved a ton of money by eliminating interest, and paid off the debt quickly, but my score did take an initial hit while his shot up.
Credit card transfers are far from the only way money management as a couple can impact your credit score. Anything you do jointly will influence both of your financial prospects long term.
Keeping Each Other Account-able
If you’re thinking about taking out a joint loan or mortgage, your partner’s credit score and financial habits can impact you in a big way.
If one partner’s score is lower, it may reduce how much money you can borrow and raise the interest rate on your loan.
If one of you tends to be more relaxed about due dates, they probably shouldn’t be the one in charge of making monthly payments. This may be why their credit score is lower, as past-due payments can show up on your credit report.
If you have a joint loan and the payment is not made on time every month, both of your credit reports stand to be impacted, potentially damaging your family’s financial future.
Applying for individual loans has the potential to circumvent these undesirable circumstances, but you have to be especially vigilant if you live in a community property state, where even individual debts can be taken under consideration if you’re married.
Not all credit changes after marriage or cohabitation are negative. If you have a higher credit score than your partner, your good money habits have the power to create positive changes for everyone involved.
For example, when it comes to a joint loan, if the two of you are responsible about making on-time payments every month, your partner’s score is likely to see a boost.
While it may be immediately more advantageous for the partner with the stronger score to apply for loans individually as their higher score will facilitate lower interest rates, applying jointly on smaller loans now may help you when you apply for larger loans together later in life.
Let’s say in 10 years you want to buy a house and take out a mortgage. Including both partners’ incomes will qualify you for a larger loan, which can buy you more space.
Keep in mind that qualifying for a larger loan is only a good thing if you can reasonably afford the monthly payments, and that your mortgage is only one part of the costs associated with owning a more expensive property.
Changes Can and Will Happen
You should also consider potential income changes over the course of your relationship. In 10 years, you may have children. If the partner with the higher score has opted to stay at home, they won’t be qualifying for anything individually without an income.
It could be in the best interest of your future family that you and your partner help each other stay fiscally responsible in ways that will be on record with the credit bureaus. Then it will be possible for the partner with the initially lower score to apply for credit on good terms if they end up being the sole income earner.
(Fiscally) Together, Forever
Whether you decide to combine your finances or keep things separate, working together as partners in a relationship will inevitably impact your personal finances. Work to build positive money habits, and you’ll be well on your way to building a financial future you can enjoy. Together.