Tying the knot can be one of the best decisions you make in your life. In many cases, tying the knot also means sharing financial accounts and bills. If you’re concerned about how mixing your credit may impact your FICO® Scores, read on for some common myths about marriage and credit, and the facts you need to know.
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Myth: Your Credit Reports Merge With Your Spouse
As the adage goes, 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 a 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 you may choose to mix your finances in other ways, your credit history remains yours alone, and the same goes for your partner. In other words, if your credit history or your spouse’s credit history needs some work, no one will notice by looking at the other’s credit reports.
The only time you’ll find the same information on both your credit reports is if you open a joint credit account.
While your credit reports remain separate, it is important to know that when you apply for a joint loan like a mortgage, lenders will look at the credit reports and scores for both you and your spouse. Mortgage lenders will look at the middle FICO Score across the three credit bureaus for both you and your spouse. The lower of those two scores will be used in credit decisions.
Myth: Changing Your Name Gives You a New Credit History
If you’re planning to change your last name — or you already have — you may be worried about having your past credit history erased because it was linked to your previous surname. The credit reporting agencies have logic that links 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, so it’s a good practice to get a copy of your credit report after you have changed your name and check that the information is accurate.
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: Your Marital Status Impacts Your Credit Score
Your 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 your FICO® Scores, your marital status doesn’t factor into the equation.
Myth: You Have to Apply for Joint Accounts
While some married couples choose to apply for joint credit accounts, it’s not necessary to do so. While it may make sense with a mortgage loan, for instance, it’s actually a good practice to have some degree of credit in your name only as a safeguard should you get divorced or lose your spouse in the future.
The important thing is that you communicate with your spouse about money matters and come to a decision based on what’s best for the relationship.
Myth: Getting Added as an Authorized User Means You’re Stuck
If your spouse adds you as an authorized user on their credit card, the history of the account will be added to your credit report. What’s more, if they miss a payment or rack up a large balance, it could affect your FICO® Scores negatively along with theirs.
But unlike a situation where you’re a joint account holder, you’re not liable for making payments if you’re an authorized user. And once you remove your name from the account, you won’t have any lingering negative impact (although read on for the next myth – you may be on the hook for debt incurred by your spouse if you get divorced).
To get removed from an account as an authorized user, you can simply 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.
If you’ve requested that the creditor remove you from the account, but it still reports the account information to the credit bureaus, you can file a dispute to have the tradeline removed 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 other 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 you’re considering divorce, consult with an attorney who is licensed in your state to understand how your assets and debts will be divided.
The Bottom Line
Getting married can be an exciting time in your life, and merging finances is incredibly common. But when it comes to your credit, it’s important to know both the myths and the facts about how your new relationship will or won’t impact your credit history and your FICO® Scores.
Above all, it’s crucial that you and your spouse communicate about your money to ensure that you’re on the same page with your financial goals and how you plan to manage your income, expenses and debt.
myFICO makes it easy to understand your credit with FICO® Scores, credit reports and alerts from all 3 bureaus. myFICO is the consumer division of FICO– get your FICO Scores from the people that make the FICO Scores. For more information, visit https://www.myfico.com.