Getting married can help boost your financial standing, but it doesn’t mean that you and your spouse will share a credit report. Your credit reports will remain separate, and any joint accounts and shared loans you open together will appear on both of your reports. While this can be beneficial, it’s important to keep in mind that the activity of shared accounts could affect both of your credit scores positively and negatively, just like your individual accounts do.
Opening a joint credit account or receiving joint financing means that both of you are legally responsible for repaying the debt. This is important to keep in mind in the case that you split up or separate and your spouse refuses to make payments, even if they were previously agreed to. It doesn’t matter who is “responsible,” the shared liability will cause late payments to impact both parties’ credit history negatively. The creditor considers both parties responsible for the debt until the account has been paid in full, regardless of changes in relationship status or divorce decree.
An authorized user is a user that you add to your previously existing credit account who is authorized to make purchases. Authorized users generally receive a card with their name on it, and any purchases they make will reflect on your statement. The biggest difference between an authorized user and a joint account owner is that the original owner of the account is the only person responsible for repaying the debt. Authorized users can also opt-out of their authorized status at any time, while a primary joint account owner cannot.
If your credit score is higher than your spouse as an authorized user, it’s possible that he or she may receive a credit score boost upon being added to your account. This will depend if your creditor reports authorized user activity to the credit bureaus. If your lender does report authorized users, your account’s activity could both positively and negatively affect your spouse. However, some lenders only choose to report positive authorized user information, so a missed payment or poor usage may not have a poor impact on someone else’s credit. Talk to your lender to find out how they treat authorized users on your account.
Whether you are happily married or separated, you and your spouse may make the decision that you want individual credit accounts. Most creditors will allow you to place a previously joint account in one of your names if both of you agree to the change. However, if the account has a remaining balance, your lender may not be willing to remove your spouse’s name unless you can qualify for that same credit individually. Depending on your financial situation, it may be difficult to qualify for financing and credit with a single income.
Although deciding to establish most of your accounts jointly with your spouse can make it easier to be accepted for financing (two incomes is better than one), re-establishing credit individually following a divorce or separation isn’t always simple. To make matters even worse, your spouse can end up doing a lot of damage to your credit standing either purposefully or due to irresponsibility following the breakup – making it even tougher on finances.
Before you decide to jump right in and open accounts with your spouse, take some time to discuss the shared responsibility of these accounts and what you two might do in a worst-case scenario. These kinds of financial questions can be tough to talk about, especially when you are counting on things lasting a long time, but a mutual understanding and respect for each other’s credit can go a long way in maintaining your score when choosing to share an account together.