When Good Credit Meets Bad Credit

by Barry Choi December 1, 2016 / No Comments

One of the hardest things about a relationship is when couples have different views on finances. It can even be more complicated if your significant other is coming into the relationship with a massive amount of debt and could use a course on financial literacy while you’re always on top of your finances.

It’s not realistic to expect each other to be on the same page but you also don’t want to keep secrets from each other. There could be a perfectly good reason for the debt (or not). Still, you want to want to take some steps to help your partner improve their credit score so it doesn’t affect the relationship in the long run.

What happens if you marry someone with bad credit?

You’ll be happy to know that if you do marry someone with less than ideal credit, it won’t directly affect you. Your credit score is completely different than your spouse’s so you don’t need to worry about your credit score dropping. And if you happen to be the one with a bad credit score, marrying someone with good credit won’t improve your score.

Where having a bad credit score can hurt a couple is when you’re making a major purchase such as a home or car. It doesn’t matter what your combined income is, lenders might get turned off by one partner’s credit score. As a result, the lender may deny you a loan or possibly charge you higher interest rate.

The good news though is that you might be able to get around this by just applying for a loan under the name of the spouse with a good credit history. You can still list both partners as owners, but the loan would only be for a single person. Keep in mind that since you’re applying for a loan using just one income, lenders will lessen the amount that you can borrow.

Opening joint accounts

Setting up joint bank accounts won’t be an issue since a credit check isn’t required but having a joint credit card could potentially be an issue. The spouse with good credit should be the primary cardholder on the account while the spouse can be the secondary user. This is good in the sense that the person with a bad credit history will still have access to credit (if this is what you want), but the primary cardholder will be responsible for any excessive charges.

Keep in mind that the secondary cardholder also won’t see a change in their credit score since the credit history is only reported to the primary cardholder. If your goal is to improve the score, you need to take a different strategy that includes having your own credit card so you have an ongoing credit history.

Improving your credit score

You don’t need to be married to improve your credit score – start by reducing your debt, if you’re lucky, maybe your new husband or wife will help you out with your debt repayment (just don’t expect it). By reducing your debt load, you’ll lower your credit utilization ratio which looks good to credit reporting bureaus.

More importantly, make your payments on time (even if it’s just the minimum). Being late with your payments is a sure way to ruin your credit so set up reminders if you have to.

Again, you shouldn’t expect your spouse to help you with payments, but don’t be afraid to ask them to educate and encourage you when it comes to financial literacy. Your credit score won’t be fixed overnight but it’ll definitely increase over time.

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Flickr: CafeCredit.com