How Merging Assets Affects Your Credit


You may want to share everything with your new spouse, but you'll each forever own separate credit scores. Nonetheless, merging assets can affect credit reports going forward and can influence access to credit. When spouses with widely different credit scores apply jointly for purchases like a car or house, one spouse's credit history might help the process while the other's might cause problems.

How merging assets affects credit

One Union, Separate Credit Scores

Marriage won't cause your or your spouse's credit rating to change. Credit bureaus maintain separate scores for each spouse -- there is no such thing as a joint score. If you and your spouse decide to apply jointly for a credit-related purchase, such as a house with a mortgage, the lender will examine both scores when deciding whether to grant the loan. One spouse's low credit score could scuttle the mortgage even if the other has a sterling credit history. As a couple, your combined assets may exceed those of either individual, but that won't affect your credit scores because credit bureaus base scores on debts and your financial history, not on your assets.

Joint Accounts Impact Your Credit

Make spending decisions knowing that your joint credit activity going forward will affect each of your credit scores. This applies when you and your spouse decide to jointly own credit cards, bank accounts, loan agreements -- including mortgages, equity credit lines and car loans -- and brokerage accounts. If your spouse has excellent credit and yours is in the doghouse, you might prefer to have your spouse apply individually for some loans or purchases on credit. Over time, good credit activity on your joint accounts can lift your credit score, at which point you can consider co-signing your spouse's individual loans. For example, by co-signing your spouse's revolving equity line, you may qualify for a higher credit limit, because the bank will consider both of your incomes.

Merged Assets, More Credit

Use your merged assets to increase your access to credit. Even though merging assets won't affect your credit scores, it can expand your credit horizons. Lenders calculate certain financial statistics, such as debt-to-assets and debt-to-income ratios, when considering loan applications. "If merging your assets causes your financial ratios to improve, you boost your chances of loan approval and reduced interest rates," CPA Jeff Looby explains. However, you should also consider the negative effect of one spouse's low credit score, which could outweigh your improved joint financial ratios.

Yours, Mine and Ours

Don't be confused: Your spouse's pre-existing debt belongs solely to your spouse. Naturally, if you engage in joint credit purchases or joint loans, you each become responsible for the new debt. However, in community property states -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and the territory of Puerto Rico -- spouses automatically become jointly responsible for all debts incurred during the marriage, even if the spouses avoid joint accounts. Looby cautions, "It's important to understand your state's rules on joint debt, just in case a collection agency improperly tries to collect your spouse's debt from you."

Avoid Credit Chaos Through Communication

Remember to keep your spouse informed about transactions within joint accounts, such as those for checking, savings and credit cards. Joint accounts can be convenient, but they also require the timely sharing of information. After all, you don't want a check you issued to trigger an overdraft because you weren't aware of a check your spouse wrote. Quicken can help you maintain good financial communication with your spouse because it can serve as a central repository for your transactions that each of you can access. You can download your accounts daily and check for any unexpected transactions, perhaps allowing you to avoid overdraft charges and unhelpful notations on your credit report.

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