Handling finances within a marriage can either be a piece of cake or seem complicated and complex, especially if your spouse’s credit isn’t as healthy as yours. You may be asking yourself if your spouse’s debt will hurt your good credit.
If you’ve already tied the knot or are thinking of getting married, you should know a few things. Marriage itself does not affect your good credit or your individual credit report, according to credit reporting agencies like Experian. In fact, you will always have a separate credit report from your spouse. Even if you change your last name, your good credit will still exist, since credit scores and reports are based on your personal Social Security number.
Your spouse’s credit, in turn, will not instantly improve just because of your married relationship.
However, your good credit has the potential to become damaged when and if you and your spouse commingle your credit.
For example, if you become a joint cardholder on any one of your spouse’s existing credit cards, late payments and delinquency will reflect on your credit report. When you agree to become a joint cardholder, you become responsible for the existing and accrued debt on those cards. If you are simply an authorized user, you are not technically responsible for any of the debt, but late payments will reflect on your credit report.
The same is true if you and your spouse apply and take advantage of offers for credit cards for people with good credit. If you apply for a credit card with your spouse and are approved, reports for that credit card will appear on both your credit reports, negative or positive.
Your good credit can also be damaged if you and your spouse cosign on a loan for a car or even for a mortgage. Simply applying together will not have an affect on your credit, though your spouse’s poor credit could win you a higher interest rate or even a decline stamp. However, if you are approved, your good credit could take a hit if you or your spouse make a late payment on the loan for which you were both approved.
If you are set on combining your credit without giving up your ability to apply for credit cards for people with good credit, one option would be adding your spouse as an authorized user to your existing credit cards or new ones. Every time you pay on time, your spouse’s credit will improve.
Many financial advisors, however, recommend that to protect your credit, you keep your credit separate from your spouse’s at least until your spouse’s credit record improves. It is also recommended that you and your spouse sit down and review your credit reports and scores annually.
Wedding bands image via Shutterstock.
The post Will My Spouse’s Debt Hurt My Good Credit? appeared first on NerdWallet Credit Card Blog.
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