Misconceptions about Couples and Credit
When it comes to spouses and credit, misconceptions abound. Here's what to know about how credit really works when you're married.
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While tying the knot and starting a life with your "chosen person" is an exciting new chapter, it also comes with an array of new financial considerations. Exactly how credit can impact marriage ranks right up there alongside major considerations such as whether or not to open a joint bank account and how to save for goals.
Sadly, misconceptions on how credit works when you're married abound. Here, we'll demystify the most common ones so that you and your spouse can get on the same page financially and ultimately build a life together, side-by-side:
Married Couples Don't Share a Credit History
Probably the most enduring false belief around married folks and credit is that once you get married, you share at least a part of your credit history, explains credit expert Gerri Detweiler.
That's simply not true. "Your credit reports and credit scores remain your own whether you're single, married, divorced, or widowed," says Detweiler. "If you have joint accounts with your spouse, they will appear on each of your credit reports, but your credit reports aren't merged."
Your Spouse's Credit Score Can't Impact Your Finances
It's quite common for one person to have better credit—or worse credit—than their partner, adds Detweiler. While your credit histories aren't merged once you get married, that's not to say that your credit doesn't impact your financial lives.
For instance, let's say you're buying a house with your significant other. Lenders will pay the most attention to the lowest score among the both of you . In turn, you might be turned away for a mortgage, or you might not snag the most favorable terms and rates.
Your Partner Won't Automatically Share Responsibility in Debt Payoff
Because one person in a marriage typically has a stronger FICO® Score—and a sturdier financial foundation, they might take on more financial responsibility.
If a spouse takes on responsibility for loans or the family finances, that could potentially lead to problems down the road—largely, an imbalance in power dynamics. For instance, if one partner has taken the reins on all things money in your partnership, the less financially savvy
one might be left in the dark and not know how to manage accounts should their spouse fall ill.
Or, the interpersonal dynamics of the marriage might be impacted, where one is constantly nagging the other about their spending choices. Another possibility? The partner who has greater control on the money might make all of the money decisions, and the other person has to ask permission to make certain purchases.
Have a Conversation About Your Money
If one spouse is helping pay off debt for the other spouse, make sure you have open lines of communication, suggests Detweiler. "That way, you don't end up resenting the responsibility," she says. "Plus, understand that you're legally responsible for the debt if they can't or don't pay it back."
You'll also want to sit down and start by sharing your hopes, dreams, goals, along with any of your concerns, fears, and worries about finances.
From there, you can come up with a game plan. Who will be tasked with coming up with a budget, or will it be a collaborative effort? How will you tackle shared bills? What about any debt you bring into the marriage? And how will you save for financial goals, such as an emergency fund, vacations, or starting a family?
"Regardless of who owes or pays a debt, treat it as a 'we' endeavor, suggests Adam Kol, the couples financial coach and a Certified Financial Therapist-I™, attorney, and certified mediator. For instance, include the debt payoff within your shared financial plan, and welcome any and all input on how to tackle managing debt as a couple.
Know How Living in a Community Property State Can Impact Your Debt
When it comes to sharing assets and debt in a marriage, if you live in one of the nine community property states in the U.S.—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin —all assets and debt that you acquire in your marriage are shared equally.
So, while living in a community property state won't merge your credit reports, it may mean you can be responsible for debt incurred by your spouse after you're wedded, explains Detweiler. "This could have implications if one of you dies, if you divorce, or if one of you needs to file for bankruptcy," she says.
Another way it can impact you is that money you earn may be considered community property. "Even if you plan to use it for savings or investments, for example, creditors may try to go after that income to pay your spouse's unpaid debt," says Detweiler.
Understand Your Partner's Debt and Financial Stress Tolerances
Besides understanding each other's dreams and concerns around money, you'll want to dig deep on the emotional aspects of money. For one, spouses often have different tolerances for financial stress, says Kol.
"This is significant when buying a home, for example, as each partner may want to spend different amounts," he explains. "Another common disagreement occurs when a business owner's spouse wants to take on business debt. They know more about the business, but its outcomes impact both spouses, and navigating that tension can be a challenge."
Having a heart-to-heart as to where you can discuss what might stress your other partner out can help you understand where the other person is coming from. In turn, it can help you more swiftly work through matters of debt and credit.
"Be mindful that people often carry great pride or shame about their debt or credit history," says Kol. "If you minimize your judgment and maximize your understanding, then they'll open up more fully and welcome your partnership in bettering their situation."
"Most people go into marriage with optimism, as they should," adds Detweiler. "However, some marriages might end in divorce or debt. If you truly care for each other, you want to be prepared for the financial implications of either scenario. Communicating about debt while you're married can help you avoid surprises or problems later on."
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Jackie Lam is a personal finance writer whose work has appeared in Salon, Business Insider, and GOOD.