As you take steps toward getting married, an important step towards a solid financial future is establishing good credit as a married couple. A good credit history allows you and your spouse to make credit purchases for items you might not be able to otherwise afford. If you do not have a credit history, it is important to establish one as soon as possible. You can start by opening a low interest credit card or putting a monthly bill, like your electric bill, in your name. If you have a poor credit history, you should take steps toward improving it right away. For example, paying off credit card debt will boost your credit score. It’s a good idea to start early. Understanding your spouse’s credit history before getting married is imperative to creating a plan for good financial health.
If you do not know if you have good or bad credit, learn how to check it here.
Individual or joint credit
Married couples can either apply for credit individually or jointly. One of the benefits of applying for joint credit is both you and your spouse’s incomes, expenses and financial stability are considered when a creditor evaluates your overall financial picture. However, applying for separate credit has its advantages too.
If you and your spouse ever run into financial problems (for example, illness or job layoff), separate credit allows one spouse to risk damaging his or her credit history while preserving the other spouse’s good credit. In addition, separate credit can also protect you and your spouse from each other. If you and your spouse cosign a loan or apply for a credit card, you are both 100 percent responsible for the repayment of the debt. So, if your spouse does not pay his or her share, you will be responsible for paying the whole amount. If credit is applied for individually, if your spouse takes out a loan or applies for a credit card on his or her own, generally your spouse is solely responsible for the debt.
Tip: While the general rule is that spouses are not responsible for each other’s debts, there are exceptions. Many states will hold both spouses responsible for a debt incurred by one spouse if the debt constituted a family expense, for example childcare or groceries. In addition, in some community property states, both spouses may be responsible for one spouse’s debt, since both spouses have equal rights to each other’s incomes. To be clear of your rights, discuss your state’s laws with an attorney if you live in a community property state.
Understanding your spouse’s credit history and creating a plan for improving or maintaining it is a good idea for ensuring a bright financial future. For guidance, please reach out to one of our experienced bankers and start a conversation today.