Money and Marriage: Merged Finances
It is easy to fall head-over-heels in the excitement of romance and honeymoon. But once the honeymoon phase is over, being married requires working out how to merge your finances with your spouse. The impact of marriage on your credit may not be quite as you expected.
Marriage Does Not Combine Your Credit Reports
The most important thing to understand is that there is no such thing as a truly consolidated credit. Each of the major credit reference agencies keeps an individual credit report, which is linked to your partner’s social security number. Reports will always remain separate, and combined credit history will never emerge.
This is no surprise since many people mistakenly believe that a couple’s credit affairs make them one. Although there is no such thing as joint credit, spouses can influence each credit score in a variety of ways.
How Joint Accounts Impact your Credit
If you open a joint credit card account with your partner, the account will be listed on your individual credit report. In that case, you and your partner’s credit score is solely based on the amount of credit you spend. The payment history of the account also influences the individual credit value of each partner.
How Authorized User Impacts Your Credit Report
Your spouse can be linked to your account as an authorized user. However, the latest rules for FICO states that scoring does not take authorized users into account when calculating scores. This means that if your partner is an authorized credit card user, he is unlikely to perceive any impact on his or her individual score and is not responsible for the debt. However, any debts incurred by your spouse will be included in your own credit report.
Situations That Affect Your Credit Report
While two partners can always choose to maintain completely separate accounts, there are financial situations where it is much more likely that they will have to be considered together.
Most of these situations revolve around mortgages and other large loans, but they can also cause problems in other areas, such as credit card debt and credit cards.
You can apply for a mortgage individually and while the bank will consider your application, you will not receive benefits for your spouse’s income and only your name will be the entitled owner on the paperwork. If you apply for an individual mortgage or any large loan, the bank may require you to include your spouse’s credit report in the account.
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