Credit and Marriage
Before you get married, it's
a good idea to understand how marriage
can affect credit.
Credit Accounts: Individual vs.
Joint
When you apply for credit (such
as a credit card or a mortgage),
you will need to choose between
an individual and joint account.
In an individual account
Your own income, assets, and credit history are considered. Regardless
of whether you are married or single,
you alone are responsible for paying
off the debt. The account will show
up on your credit report and may
also appear on the credit report
of anyone you appoint as an "authorized
user" of your account (such
as a spouse). Take note, too, that
in some cases (depending on where
you live), the individual debts
of one spouse may appear on the
credit report of the other.
An individual account has its advantages
in that only you are responsible
for it: no one else can negatively
affect your credit record. However,
if you have a low-paying or part-time
job, or do not work outside the
home, you may have difficulties
in getting credit without including
your spouse's income. As with
all money matters, it depends on
your unique situation.
A joint account
On the other hand, includes both
you and your spouse's income,
financial assets, and credit history
collectively. Both of you are responsible
for ensuring that debts are paid,
and joint accounts will appear on
both of your credit reports. Obviously,
there is benefit here in that collectively,
your financial picture may prove
much stronger in helping to get
credit. However, you are also both
responsible for the debt, even if
you divorce and separate debt obligations
are assigned to each spouse. The
danger here is that a bitter ex-spouse
can seriously jeopardize your credit
history through these jointly-held
accounts.
What happens if you divorce?
If you are considering divorce or
separation, pay special attention
to the status of your credit accounts
and note the following:
If joint accounts are maintained,
make sure you make regular payments
during this interim period so that
your credit record won't suffer.
As long as there is an outstanding
balance on a joint account, you
and your spouse are responsible
for it.
If you divorce, consider closing
joint accounts or accounts in which
your former spouse was an authorized
user. Alternatively, you can ask
the creditor to convert these accounts
to individual accounts.
A creditor cannot close a joint
account because of a change in marital
status, although a joint account
can be closed if either spouse requests
it.
A creditor is not obligated to change
a joint account to an individual
account: They may require you to
reapply for credit on an individual
basis.
In the case of a
mortgage or home
equity loan, a lender is likely
to require refinancing to remove
a spouse from the obligation.
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