What happens to credit scores after you get married? They don’t merge, but joint purchases, such as a house, can help or harm one spouse. After a divorce? That’s tricky.
SAN JOSE, Calif. – Tying the knot can be one of life’s best decisions – but it also impacts credit scores when you start to share financial accounts and bills. Credit scorer FICO created a list of “common myths” about marriage and credit.
Myth: Your credit reports merge with your spouse
Love conquers all – and that can include a less-than-stellar credit history. But should you worry about your partner’s credit history impacting yours when you marry?
In short, no.
Credit reports are created and stored at the individual level – not at the household level. In today’s world, most people have a credit file with some level of credit established in their name prior to getting married. While newlyweds can choose to mix finances in other ways, your credit history remains yours alone. If one credit history needs some work, no one will notice by looking at their spouse’s credit report.
The only time a married couple will have the same information on both of their credit scores is if they open a joint credit account.
However, lenders may look at both credit reports before approving a loan, notably for something as big as a mortgage. Home lenders look at the middle FICO Score across the three credit bureaus for both you and your spouse – and the lower of the two scores will be used in credit decisions.
Myth: Changing your name gives you a new credit history
The credit reporting agencies can link information together to maintain a single credit file on a person with a name change. It may take a couple of months to link files, however, and it’s a good practice to get a copy of your credit report after you’ve changed your name and verify accurate information.
When you apply for credit in the future or change your personal information on your credit accounts, the credit reporting agencies will add your new name to a list of name variations on your credit report.
This list can also include different spellings of your name, a shortened name – such as Bill instead of William – and other variations that have been reported by creditors via credit applications and account information.
Myth: Marital status impacts your credit score
Marital status can impact certain aspects of your financial life. For example, married people tend to qualify for lower auto insurance rates because they’re statistically less likely to file a claim.
But when it comes to calculating a FICO Score, marital status doesn’t factor into the equation.
Myth: You have to apply for joint accounts
Some married couples apply for joint credit accounts, but that’s not necessary. It may make sense with a mortgage loan, but it’s advisable to have some degree of credit in each person’s name – a safeguard in case one spouse dies or the couple gets divorced.
Myth: Getting added as an authorized user means you’re stuck
If a spouse adds you as an authorized user on their credit card, the history of that account will be added to your credit report, both good and bad. If they miss a payment or rack up a large balance, it could affect your FICO Score negatively along with theirs.
But “authorized user” isn’t the same thing as a joint account holder, and you’re not liable for making payments if as an authorized user. Once an authorized user’s name is removed from the account, they won’t have any lingering negative impact – with the possible except of divorce ramifications.
To get removed from an account as an authorized user, contact the credit card company and ask them to remove you from the account. Once that happens, the account, as well as the negative information associated with it, will vanish from your credit reports.
Myth: You’re off the hook if you get divorced
Even if you never open a joint account with your spouse, you may be on the hook for any debt they incurred during the marriage. This is particularly true in community property states, where assets and debt that are accumulated by either spouse during the marriage are considered to be owned and owed by both spouses.
In non-community-property states, debt incurred by only one spouse is generally considered to be that spouse’s responsibility unless it was for family necessities like food, shelter and educational expenses.
If considering divorce, consult with a licensed attorney to understand how assets and debts will be divided.
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