Friday, October 24, 2014

Does Marrying Someone with Bad Credit Affect Your Credit Score?

There are ways to avoid letting your spouse’s credit history from affecting your own, and the best way of doing so is understanding how marriage affects your credit score.

In Ontario, the act of getting married on its own won’t change your records or your spouse’s, and once married you and your spouse will continue to have individual credit scores.



What is Bad credit ?


Bad credit is the failure to keep up with your credit agreements and the inability to get approved for new credit. This means you haven't paid your past dues on time. When you have bad credit, lenders are afraid of lending,as you may fall behind on any loan or credit card you're given. This will result for your application for credit to get rejected. The credit score is a good indicator to identify good credit and bad credit. If your credit score is below 620, then it is said that you have bad credit.


Joint Financial Decisions Matter


After marriage, some couples find that it makes sense to assume liability for their spouse’s debt either partially or entirely. Assuming debt changes your financial standing, which creditors will take into account when financing loans. Applying for debt as a couple is a serious decision because if your spouse was unable to make payments on their loans on time in the past, they may also struggle to do so in the future. Debt in arrears and overdue credit cards on loans made as a couple will affect you and your spouse’s credit score.


Giving Creditors Access to Your Spouse’s Credit History


Your creditors will not have access to your spouse’s credit history unless you add your spouse to your financial accounts. Your history will not automatically be merged with your partner’s credit history, however, creditors will look to see your partner’s ability to repay loans. If your spouse has a good credit score, that will tip the balance in your favour while the opposite is true of a spouse with a bad credit score.


Should you Share Your Finances with Your Spouse?


It may advisable to keep your financial accounts separate, especially on accounts where you are the one who uses it most. Even granting user authorization to your spouse allows your creditor to see your partner’s credit history.

If you’re unable to keep your finances separate, be prepared to have your history affect your spouse’s and vice versa. For example, when jointly applying for a credit card, the person with the lower credit score will raise the interest rate on your credit. In the case where both partners have a poor credit history, your application may not be approved at all.


Filing for Bankruptcy


If your spouse is unable to repay their debt, bankruptcy may be their best option. As long as their loans were made separate from you, most likely you aren't liable and in addition, your credit score won’t be affected. Before making the decision, it’s best to consult a professional bankruptcy trustee who will walk you through the important things to consider, such as finances, credit scores, repayment schedules, and plans to regain financial health.


Tips for Dealing with Bad Credit


● Taking your spouse’s last name will not erase your credit history, which is tied their Social Insurance Number

● For repairing bad credit, applying for a loan jointly can raise your spouse’s credit score. Another option would be to fix your credit score individually through prudent borrowing and repayment habits

● Always make your minimum payments! Even if you’re not making large payments to rid your debt, it’s crucial you make minimum payments as to not put yourself in larger debt than necessary

Venetia Rose has been a freelance writer and blogger. She loves to share and keep herself updated with the latest tips in financial consulting. Her interests are cooking, photography, craft and painting. Follow her on Face book https://www.facebook.com/laksh.venetia


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