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Credit Tips for Newlyweds: How to Protect Your Credit (for Better or Worse)

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Your credit reports and credit scores are likely the last things on your mind when you’re planning your wedding, and who can blame you?  However, getting married can be both beneficial and problematic to your credit, and understanding how liabilities work prior to tying the knot can save you big bucks down the road. With that in mind, here are three credit tips for newlyweds to help insure you protect your credit — for better or worse — and start your marriage on the right financial foot.

There’s really no need to jointly apply for credit

A common misperception about credit after marriage is that both spouses have to apply for any subsequent loans or credit cards.  That’s not true at all.  In fact, that might be a huge mistake.

The only reason to jointly apply for credit is if you need two incomes to qualify for the loan amount. Applying jointly for credit cards or auto loans doesn’t make much sense because you don’t need two incomes to qualify. And, if you do need two incomes to qualify for an auto loan, you’re probably buying too much car and should re-think your options.

The primary reason you shouldn’t jointly apply for credit doesn’t have as much to do with marriage as it does with divorce. The statistics are unclear on divorce rates but roughly 50% of all marriages fail. And, when a marriage fails, liabilities have to be divided and assigned to one of the soon-to-be ex-spouses.

That’s easier said than done because creditors do not recognize divorce agreements. That means if you have joint credit, both ex-spouses will still be liable regardless of what you agreed to during your divorce. That can become problematic because if payments are not made the late payments will show up on both ex-spouse’s credit reports.

When you get married your credit reports and credit scores don’t magically combine.

Credit reports are maintained at the individual consumer level by the three nationally recognized credit reporting agencies; Equifax, Experian and TransUnion. That means you will always have your three credit reports and your new spouse will always have his or her three credit reports.

This is important because you don’t have to co-mingle liabilities just because you’ve gotten married. You can maintain credit independence as long as you like, which is not a bad idea. And just because you choose to not co-mingle liabilities it doesn’t mean you can’t help your spouse get a credit card by adding him or her as an authorized user on one of your existing cards.

Choose the applicant with the higher credit scores.

If you do choose to apply jointly for credit the lender will pull both you and your spouse’s credit reports, and credit scores. In that scenario the lender will make their decision based on the aggregate of information. This gives the perception that you’ve got joint credit reports and joint credit scores but in reality they’re still mutually exclusive.

If your credit scores are considerably higher or lower than those belonging to your spouse applying jointly, it’s going to result in a higher interest rate. You cannot apply jointly and be immune from the downside of a co-applicant with a lower credit score. So, if you need two incomes to qualify for a loan, then the family will be paying more in interest. You can avoid this by avoiding co-applying for loans until both spouses have similarly strong credit scores.

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