Congratulations – You’ve tied the knot! One of the first questions married couples ask their financial advisor is if their credit scores and debts are going to affect the other partner.
While your credit scores are going to play a major role in many of your financial decisions as a couple, your spouse’s credit score cannot make your credit score better or worse. Each person has their own individual score, based on their own individual credit report and credit history, however, if you were hoping for a good interest rate on that first home mortgage, and want to use both of your incomes to qualify for the loan, it might be wise to work on improving your spouse’s poor credit score first.
If you learn that your husband or wife has a low credit score, it is good to do some thoughtful financial planning. Sharing a credit card or applying for a large loan together requires clear communication about purchase limits and payment plans to prevent conflict and ensure bills are being paid. Then help your spouse apply the good money habits you possess to build to get their credit score in good standing.
To set your financial future as a married couple down the right path, here are seven ways you can help your spouse rebuild their credit.
7 Steps to Rebuilding Your Spouse’s Credit Score
You can help your spouse rebuild a credit score through careful planning, sharing specific joint debts, paying down their current debt obligations and taking measures to improve their FICO. Remember, your good credit alone can’t build up your spouse’s credit report, and at some point they will have to take individual loans.
1. Make a Plan to Pay Off Debts
Carrying too much debt can hurt both your credit scores. Gather your bills, credit card statements and credit reports to create a comprehensive list of your debts. Assess the total debt on each account and note their interest rates. Then, make a plan to pay down the balances. It’s often best to pay down your highest interest rate balance first or pay as much as you can toward one particular debt while making the minimum payment on all the others.
2. Add Them as An Authorized Credit Card User
You can help boost your spouse’s credit score by sharing your good credit and adding them as anauthorized user on one (or more) of your credit cards in good standing. Once you add your spouse as an authorized user, the history for that account and amount of available credit will appear on your spouse’s credit report. And don’t forget – you are ultimately liable for paying the balance on these accounts.
3. Apply for a Credit Card Together
You can also apply for a new credit card together. The credit card issuer will review both your credit histories and personal incomes to set the terms of the credit card. And unlike an authorized users, you and your spouse will be jointly liable for the balance.
- Help Them Afford a Secured Credit Card or Small Loan
Another way for your spouse to repair their poor credit score is to open a secured credit card. Sometimes it can be hard for one person alone to afford the deposit with their personal income alone. Review your household budget and find a way to cut expenses, save up or gift your spouse with a good security deposit.
You can also help your spouse score an individual loan under the right conditions. Consider paying a share of the deposit on a small loan financed to pay for a home appliance or entertainment device.
5. Share Large Loans
If you are going to take out a large loans, such a mortgage or car loan, it should be tied to both of your names. While this will help your spouse build their credit score, but beware that lenders may not offer you the best interest rates or terms. Your good credit will help to keep interest rates low and conditions positive, however, lenders can take both scores into consideration regardless of proof of income.
If the situation is favorable, take out your mortgage in both of your names.
6. Balance Your Shared Debts
Once you are married, you are bound to accumulate more debts together. These debts should be balanced between your two credit scores. Neither individual should carry the majority of the debt load. And if your spouse is carrying costly debt, consider taking on some of those new debts in your name.
- Help Educate Your Spouse on Good Credit Management
The final step to get your spouse back on the road to good credit is to help them exercise and stick to good money habits. Review your bills and household budget on a regular basis. Give them financial responsibility and ensure they are paying the balance in full and on time each month. And encourage them to continue their financial education so you can build a strong financial future together.
Looking for more ways to repair your bad credit? Read Take Measures to Repair Your Credit Score.