What do you do when your spouse has a poor credit rating?

Getting married will change your life in many ways. Putting the cap on the toothpaste. Trading in the convertible for a minibus. Making your relationship Facebook official…

Your credit scores don’t suddenly merge. Even if your spouse has a negative credit history, it won’t initially affect your credit score in any way.

So, when does your spouse’s credit rating affect yours?

The changes only come after you’ve married and you decide to jointly apply for credit products together like a loan or a credit card. Then, credit providers will look at both your incomes, which may make it easier to apply for loans. They will also look at both your credit scores – and if one of you has a bad credit history, there’s a chance your application won’t be approved. Or they may charge a higher interest rate.

What do you do when your spouse has a poor credit rating?

If you and your spouse have different credit scores, this may affect any joint applications for credit. In this case, you will have a few decisions to make around how you want to handle applying for credit and loans. Will the spouse with better credit score make the applications? Will you apply jointly and accept higher interest rates to improve the other spouse’s score? These are questions you have to ask, depending on your financial situation and priorities.

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Does my marriage contract affect my credit rating?

Your marriage contract doesn’t affect your credit rating, or how you are assessed for a loan. It affects who is responsible for the debt. So if you’re married in community of property, it means that you and your partner are equally and fully responsible for any debts incurred while you are married.

Your marriage contract doesn’t affect your credit rating, or how you are assessed for a loan

In other words, if you can’t pay your debts, your creditors can legally recover the money from your spouse. If you have an ante-nuptial contract, only the primary account holder is legally responsible for paying any debts.

If we have joint credit, how is this recorded in a credit bureau?

A joint account is reflected on the credit records of both you and your spouse. The following information is kept on the joint account until it is settled: the type of account; the people responsible for the debt; your opening balance; your current balance; the number of instalments, instalment amount and repayment frequency; months in arrears and overdue balance.

What if we miss a joint credit payment?

If you default on a joint account payment, this information will reflect as a default or judgement on both your credit records.

What if I sign as a guarantor, or co-sign, for my spouse?

You need to be very clear on what you are getting into. When you co-sign on a loan or a credit card, you take on legal responsibility for that account, and it appears as your obligation on your credit report. If your spouse misses payments or defaults on the loan, your credit reports will be affected – and the creditor may require you to settle the debt.

How do I take my name off a loan if our relationship ends?

Once the account is opened, it’s extremely difficult to remove a co-signer off the loan. The person keeping the account will need to show the bank that they are able to take over the loan, or close it, to end the co-signing agreement.

Not even a divorce decree will relieve you of your liability to the creditor, unless the creditor themselves releases you from that account.

So what can you do to protect yourself?

If you have a joint loan, or have co-signed on a loan, check your credit reports from TransUnion and other credit bureaus regularly to see how the other person is maintaining the account. That way, you can address any potential problems early to avoid an issue on your own credit rating down the line.