Does Getting Married Affect Your Credit Score?
Whether you're buying a car or purchasing your first home, the "almighty" credit score will be weighed against your purchasing power when large financial decisions are involved. It's also a discussion most couples merging finances or building joint-goals will face at some juncture in the relationship. Unfortunately, there are instances in an engagement or partnership where critical information isn't disclosed. In fact, some couples don't even discuss money until they've made it down the aisle.
According to The Knot Financial Survey 2022, the couples who share frequent money discussions have healthier relationships as they build proficiency with budgeting. "Step one is realizing that in a relationship, money isn't like emptying the dishwasher or mowing the lawn, where one person naturally ends up handling one task. Money is more like parenting," says personal finance expert Ramit Sethi, author of I Will Teach You to Be Rich. "It's something that cannot be outsourced. Both partners have to be involved."
Now to back up on exactly what a credit score is: there are good, average and bad credit scores. Your credit score is used by lenders to determine if you're a potential candidate for their services. If you have a low credit rating, you'll be penalized with more fees and a higher interest rate. Credit ratings range from 300 to 850 points, and the higher the number the better your credit score. The following standards are presented by other credit sites: excellent to very good credit is 700 to 850, fair credit is 680 to 699, average credit is 620 to 679, low credit is 580 to 619, poor credit is 500 to 579, and bad credit is 300 to 499. So to answer the question of what is a good credit score, we would say 700 or higher should be the determined goal.
On occasion, there are zero financial discussions about how much debt each individual carries, or what their credit card APRs, savings account balances, or retirement plan amounts are, at present. (When you get married, you'll share your assets, including debt. Though it doesn't affect your credit score individually, it could change the way you manage debt.) It's imperative that before getting married, you know where your partner stands credit-wise; After all, when you say your vows, you'll be saying "I do" to their good or bad credit decisions.
While a credit score isn't the end-all (circumstances range), that way you'll build trust sooner as you work towards your dreams and goals. To help you navigate such scores and more, we've answered some of your most frequently asked questions regarding what happens to your credit when you get married. Whether you're wondering how does getting married affect your credit score or what marriage means for a joint checking account, follow our guide for the answers to your financial questions.
In this article:
Does Marriage Affect Your Credit Score?
Now that you have a better understanding of credit scores, how does marriage affect your credit score? In short, it doesn't. When you get married, your credit scores stay the same. The idea that your credit scores merge or lower simply via the act of marriage is a myth. It's important to know that your spouse's past credit history will not impact your profile.
However, when you open a joint account, your information may be shared on each other's reports. "If you start merging and combining finances–for example, if you're both on a credit card, and one partner is an authorized user on a card (and I see this a lot in the heteronormative relationships where the man will take up credit card and the woman will be the authorized user), one individual is actually building their partner's credit score. They are not building for each other."
How Does Your Spouse's Credit Score Affect You?
While the act of marriage alone doesn't impact a credit score, your partner's financial decisions–good and bad–can certainly affect these numbers over time. For example, let's say your partner is an authorized user on your credit card without establishing the habits of paying bills on time or in full. Their lack of proactivity with money management could impact your credit score and also debt loads.
"That's the interesting thing that I see a lot: money isn't talked about enough to understand how an authorized user is different… or the same thing with [mortgages]. We see homes go to one partner [often the higher earner], so there's no equity," says money expert Tori Dunlap, author of Financial Feminist. "There's no division, technically or legally with equity on that house. It goes to one person. It's under that one person's name. As you're getting married, you need to talk about money. You need to have open conversations about money."
Does Changing Your Last Name Affect Your Credit Reports?
You now know what happens to your credit score when you get married (nothing), but what about if you change your last name? If you take on your spouse's last name, it will have no impact on your credit. With that said, you will want to notify your existing creditors and the Social Security Administration and have them update your new name.
Does a Joint Checking Account Affect Credit Score?
Traditionally, most couples merge their money into a joint account. Ultimately, this means merging paychecks, recurring income, and tax refunds into a single bank account. One of the biggest reasons couples opt for a joint account is because it's easier to track one checking account versus having to review multiple accounts to find out where their money is going.
"Within that joint account, you should really think about looking at four key numbers. These are the numbers that matter. Number one: what are our fixed costs? That would be your rent, mortgage or car payment. All the fixed costs that you incur that are stable every month. That should be less than 60% of your take-home pay; typically, it's between 50-60% of your inbound payments," explains Sethi. "This is where people get in trouble. They spend too much on housing or their car and suddenly they're fighting about dessert at the Cheesecake Factory. But it's not the dessert that's causing the fight. It's that you've spent too much on your car and you simply have nothing left to spend."
"The next number is Savings. You should track that should be five to 10% of your take-home pay. Another five to10% is investments," Sethi adds. "Finally, my favorite number of all is guilt-free spending… You get to go out and do whatever you want. It could be eating out or buying a beautiful jacket. That is 20 to 35% of your take-home pay. Yes, that's substantial."
Some couples do not like their spouse knowing what they spend every dollar on or have trouble purchasing a gift for their spouse because it will appear on the transaction history of their joint account. Therefore, you may decide to maintain individual bank accounts should you want to make a gift purchase or spend money.
Finally, there are also drawbacks to a joint bank account that could affect your credit score. If one of you is not good with money, he or she may overspend consistently, resulting in you not having enough money to pay your bills. Creditors will then report payments being late or not received at all, which will affect each individual whose name is on the loan or credit card. It's important to be upfront when it comes to disclosing your debt. If you don't disclose to your spouse that you have student loans, credit cards, alimony, child support, or other debt, then those bills are not allocated in your budget for outgoing expenses.
How Do Your Credit Scores Impact Applying for a Mortgage or Loan?
Despite that, if you want to purchase a home together, your spouse's negative credit history could impact your mortgage rates because both credit histories are being reviewed during approval. If you or your spouse has a less than acceptable credit score, the loan company may be hesitant to extend a loan. Prior bad credit will be reflective in the annual percentage rate.
Before you make a big purchase like a house, if one of you has a bad credit score, it would be advantageous to improve that bad credit score before making the major purchase. Yes, this may delay plans, but overall you'll end up with a better interest rate, which will save you big bucks in the long run.
Should You Merge Credit Accounts?
The answer to this question is entirely up to you as a couple. But before making a decision, we recommend having a thorough conversation regarding your credit histories and your payment behaviors. While consolidating your accounts can make your record keeping and joint tax preparation easier, do realize that any debt accrued will become joint debt and missed payments will negatively impact both of your credit scores--regardless of who was responsible. This, in turn, can impact your ability to borrow jointly, too.
"In a legal partnership [like marriage], one of the most powerful things you can do for each other is make sure that it's OK if you're both on credit cards," explains Dunlap. "Both of you know it's under both names. I see this often where women start building their partner's credit and then they try to take out something and they together don't have a decent enough credit score because all of their responsible choices have actually benefited one partner."
Do You Share Debt After Getting Married?
The answer to this question really comes down to where you live. Generally, the debt you and your spouse accrued prior to your marriage will remain separate. However, in some states, the debt you acquire as a married couple may become joint debt, even if one spouse is unaware of the racked-up debt by the other spouse. In other states, a spouse can take responsibility for individual debts, but the couple can also jointly decide to take on joint debts should it benefit both parties.
It's relatively easy to get lost in love, but it's important to remember that a healthy marriage means also means having a healthy financial outlook. Be honest with your spouse and disclose all of your debt. This may cause initial frustrations; however, it could save your marriage in the long run. "The truth is the vast majority has a prenup already. It is just chosen for you by the state," explains Dunlap. "For a vast majority of people, they already have a very hard and fast legal 'order of operations' of what happens if you separate… That's one thing, again, that not enough people talk about is prenups. I think it's one of the healthiest things you can do because you're level-setting expectations of what you want this relationship to look like and what you expect. In fact, you're deciding for yourself and your partner, rather than the state or the government deciding for you."
What If We Are Facing a Poor Credit Score?
You should sit down as a couple with both credit scores in hand and do a thorough analysis of what items could be improved. In addition, utilize this time to set financial goals. For example, if you're thinking about purchasing a home or having children, figure out what financial milestones you'll need to achieve before these actions can happen.
"A lot of people talk about is what's called credit utilization, and it's basically asking the question: How much credit are you using? If you have a $10,000 credit card limit and you spend $3,000 your credit utilization rate is 30%. Ideally, to boost that credit score, that utilization rate should fall below 30% or under 10%, even, if you can swing it," says Dunlap. "One of the most powerful things you can do is actually go and ask for a credit line increase from your credit card company. Then, don't use it… and that way, your credit utilization rate goes down. Again, if you want to build a life either as an individual or as a couple, you're probably going to need a decent credit score."
Nonetheless, don't have the mindset that you'll always be in debt or will never get away from past bad credit decisions. Anything is possible. If you're willing to put forth the work to improve your financial history, you'll reap the rewards together and be much happier in the end.
–With reporting by Angela Guzman