As an old relationship adage goes, “Opposites attract,” so might your credit scores. Many marriages seem to unite polar opposite credit scores.
If your credit score is poor, but your spouse’s is good, is there hope for qualifying for a better credit card, auto loan, or mortgage?
The short answer is, “Yes.” However, there are a few things to consider when you and your spouse are applying for new credit.
When Buying a Home
If you’re married and want to buy a home, owning and financing the house together is common. But keep in mind that if you are applying for a mortgage together, your mortgage lender will look at both credit profiles.
Both of your credit scores, lines of open credit, credit payment history and especially any prior mortgage payment history will all be examined together. If one spouse has good credit and the other has poor credit, the lower credit score is usually used to qualify for the mortgage loan and rate.
As a couple, you will be seen as one entity; so having a poor credit profile will definitely be detrimental in this situation. All is not lost, however – there is a way that you can take advantage of your spouse’s good credit.
Many people believe that the name listed on the mortgage loan is the actual homeowner. That’s not exactly accurate. The mortgage loan provides for the financing of the purchase of the home; however, the title designates who owns the property. As a result, the spouse with the better credit score could apply for the home financing and you can still have both names listed on the title.
The only catch with this strategy is that the spouse with the better credit score will typically also need to be able to have sufficient income to qualify for the mortgage alone.
Similarly, if you want to apply for a new credit card but have poor credit, there’s a way to utilize your spouse’s good credit. Your spouse could apply for the credit card and list you as an authorized user.
This approach will allow you to take advantage of your spouse’s better credit profile to qualify for a lower rate. However, unlike the mortgage loan, since both you and your spouse will use the credit card, the account will be reported on both of your credit reports – both the good and bad.
Used responsibly, this strategy is an excellent way to help improve your credit with the assistance of your spouse’s good credit.
Financing a new or used car can be tough with a poor credit score, and yes, you guessed it, your spouse’s good credit can come to the rescue.
This situation has two options:
Your first option is similar to a mortgage: simply have your spouse qualify for the auto loan. The car loan is theirs, but you can certainly use the vehicle and be covered under the insurance policy.
Your second option is like a credit card: your spouse’s credit score is the primary and you are added to the loan as a co-signer. You’re both on the hook for the loan and as a result, it goes on both of your credit reports. Like the credit card scenario mentioned above, this can be a great opportunity to re-build your poor credit score.
Much like a mortgage loan, being a co-signer does not automatically mean you’ll be or need to be listed as a co-owner for the car. The title of the car is the document that specifies ownership, not the car loan.
Despite this general guidance, your credit card, auto, or mortgage lender will ultimately determine the qualification guidelines for their loans. Consult closely with your lender to determine the best way to take advantage of the good credit in your relationship.
And in the future, make it your goal to improve your credit score, that way your spouse doesn’t have to carry all the financial weight in your relationship.
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