The Cost of Marrying Someone with Bad Credit

What better time to talk about couples and credit than the week leading up to Valentine’s Day?

Okay, credit may be low on the romance scale next to flowers, chocolates, and anything else that desperate or pressured partners buy each other during this Hallmark holiday. But the truth is, your partner’s credit can have a huge impact on your finances. It’s definitely a topic worth discussing (maybe not exactly on Valentine’s Day, but certainly some time in the not-too-distant future).

To illustrate our point about the importance of credit, we created a hypothetical couple: Kelly and Joe.

Kelly and Joe are married homeowners with kids, and are losing money each month simply because Joe’s credit isn’t that great. Joe wasn’t so responsible before he met Kelly. He had taken on too much debt, missed a few payments, and actually had one account sent to a collection agency. Joe’s score of 580 is hurting the household finances.

Kelly’s credit score of 720 is very good. She has never been late making credit card payments, and has a long, positive history of paying her debts back as agreed.

Kelly and Joe are paying more than they need to

Kelly and Joe have been married for five years, and in that time, they’ve had a couple of kids, purchased a house, and bought two cars. They hold their mortgage and car loans jointly. Because Joe’s credit isn’t that great, they weren’t able to lock in the lowest interest rates on these loans. They pay $1200 a month on their mortgage, when they could be paying only $1060 if Joe’s credit score was stronger. Same with their car loans: they pay $50 more than they would if Joe had better credit.

Kelly and Joe’s potential savings if they both had stellar credit scores? $190 a month, $2,280 a year, and a whopping $68,400 over the course of thirty years! That’s enough to help put their kids through college.

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So why didn’t Kelly just apply for the loans in her name only, and leave Joe out of it? My guess is that Joe’s income was needed to prove to lenders that they had the means to meet their debt obligations each month. Or maybe Kelly and Joe knew nothing about credit and applied for loans not knowing that Joe had a poor score.

It’s important to remember that even if you marry, your credit is always still only in your name. There is no such thing as a joint report or score, only a joint account which can appear on both you and your partner’s credit reports. So each of us is ultimately responsible for our own credit.

The bottom line

If Kelly and Joe had worked on improving Joe’s credit before signing on the dotted line for a mortgage and two car loans, they would be saving a hefty amount of dough each month. Joe’s credit score has been improving steadily for the past couple of years as they make timely payments to their lenders each month, so maybe in the future the couple can think about refinancing their home at a lower interest rate.

Be smarter than Kelly and Joe! Take care of your credit by regularly reviewing your reports and scores; check out your partner’s credit before applying for a loan together; and take steps to improve your credit (or your partner’s, if you’re willing). This will help you to get the best deals on future loans and rack up major savings. Happy Valentine’s Day!

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