What if I Marry Into Poor Credit?

How much did you really know about the person sleeping next to you before he or she began sleeping next to you?  Unless you were under the threat of a “shotgun” wedding you probably knew all you needed to know, in your mind anyway.  But, if you’re like most people you were probably well down the relationship path before you two had the conversation about finances.  And, I’m not talking about “how much do you make?”  That’s hardly sufficient financial discovery.

So regardless of where you are on the relationship time line, here are some important credit factoids to remember about vis-à-vis your significant other.

You don’t marry into poor credit reports

The credit reporting agencies do not merge your credit reports once you get married.  In fact, they don’t even know you got married since that’s not a data point on your credit reports.  Now, when you start applying for credit jointly you’ll be letting the cat out of the bag and you’ll allow lenders to see both (your’s and your spouse’s) of your credit reports and both of your credit scores.  This gives the impression of a joint credit report, although it really isn’t co-mingled data.

If you choose the path of having joint credit “till death do you part” then eventually your credit reports will look very similar to those belonging to your spouse.  And, your scores will likely be very similar.  That will take some time.

Poor credit can certainly impact both of your finances

Matthew Amster-Burton wrote a nice piece about co-signing leases a couple weeks ago for Mint.  The danger of co-signing anything is that you’ve now become joined at the credit reports with the other co-signer and you’ve just done the lender a huge favor.  Why?  The lender now has two people on the hook for repayment rather than one.  This puts both spouses in the cross hairs for negative credit reporting if the co-signed loan goes into default.  I’m of the school of the thought that unless you need two incomes to qualify for a loan, only one of you should sign the promissory note.  The exception to that rule is when the breadwinner has poor credit and needs the co-signature of the spouse with the better credit.  This will likely result in better loan terms but now locks you both in for repayment.

If you do choose to co-sign for credit then the lenders will have full rights to access the credit reports belonging to you and your co-signer.  There is no such thing as co-signing for “just the application process” without the ongoing legal liability for the debt.

NOTE:  Yes, if the loan is managed properly then both parties will benefit in a co-signer scenario.

Even if you don’t apply jointly, lenders can still pursue you for payment

If you live in one of the community property states your spouse’s lenders can come after you for repayment of debt even if you never signed for the loan.  The argument is that, despite not being on the “note”, you benefitted from the fruits of the loan and, as such, should be liable.  I’m not sure I agree, but the law is the law.

Credit scores don’t merge

Your credit scores are calculated at the individual consumer level.  What this means is despite your marriage or choice to jointly apply for loans with a spouse (or anyone else for that matter) your credit scores will never ever bleed over into anyone else’s credit reports, and vice versa.

Collectors may attempt to coerce you to pay spousal debts

Just because you don’t live in a community property state and you have no joint debts that certainly doesn’t mean collectors are going to leave you alone if they’re trying to collect debts from an ex-spouse, current spouse or deceased spouse.  There’s nothing illegal about collection agencies simply asking for you to pay the debts incurred by someone else.  However, their options are severely limited because they can’t report anything to your credit reports because that would be illegal.  At best they can play the “oh man, come on…don’t you think you should pay your husband’s debts and restore his good name” card.  Paying is your choice, but not your obligation.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger forMint.com, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.