Credit Scores and Wedding Vows

When a couple marries, not only do they combine households, but they combine credit scores as well. Perhaps she is a saver who pays her bills on time. He is a spender who enjoys giving her lavish gifts. Charming initially, but maybe not so much when reality sets in. When the couple jointly applies for a loan, they may have an unpleasant surprise if one or both haven't learned to manage their finances.

Each of us has a credit score, which is based on numerous criteria, including the length of a person's credit history, the amount and type of available credit on credit cards and revolving accounts, whether payments have been made on time or are habitually late or missed, and more.

Though each credit reporting bureau has its own scoring system, the FICO score is most commonly used by lenders. Scores range from 300 to 850. If a couple jointly applies for a loan, both scores will be checked. The lender may take an average of the two scores or they may use the lower score. Using the lower score has the potential to significantly impact the amount of monthly payments and the interest rate charged and, therefore, the total pay out on the loan.

If one spouse has a significantly lower credit score, the couple might choose to have only the person with the better score apply for a loan. However, only that person's income will be considered, which may reduce the amount that can be borrowed. Alternatively, the couple might choose to put off purchasing that new car or refrigerator and spend some time working on improving the lower credit score.

Adding a spouse to your existing credit card may or may not help his/her credit score. A joint credit card is factored into each spouse's credit score as if it were an individual account. If your spouse has limited available credit and you have more, the spouse's credit score might be increased. Conversely, if the spouse overspends, then both of you will take a hit. It is possible to add a spouse to a credit card as an authorized user, not a joint owner, much like you might add a teenaged son or daughter. In that case, your credit score will be impacted less.

Knowing your intended's credit score and how he/she handles money may not affect your desire to marry, but it will help you enter the marriage with eyes wide open and begin making wise financial decisions as a couple.