TomorrowMakers

To ensure a happy married life and safe financial future, it is always better that you understand each other's financial history. Learn more in detail about the impact of marriage on your credit scores.

6 Common questions about the impact of marriage on your credit score

Most of you might have talked about finances and money with your better half only after the marriage, but you would have made the best decision if you had spoken before marriage. It will help you understand the person with whom you are going to live for the rest of your life, and how he/she is managing finances will directly impact your married life, future goals and ambitions.

Check out the below articles for more information:

1) Do Not Ignore The Elephant In The Room If You Have Gotten Married Recently

2) Got Married Recently? Here's How To Get Your Finances On Track

Along with that, most couples have a lot of confusion about their finances, bank accounts and credit score, loans or debts, and many more things like how they will impact their credit score and finances after marriage and what things need to be kept in mind.

If you are facing the same thing and are in a state of confusion, don't worry because, in this article, we will cover all the important questions that will help you get answers to all of your questions.

1. Do existing accounts merge together when you get married?

Absolutely 'NO', the existing accounts won't get merged with your spouse's account after you get married. Thus you continue to own your accounts, and your spouse also continues to hold his/her accounts. 

But that doesn't mean you can't merge your accounts because you can do that by yourself, or you can also open a joint account that can be easily operated and used by both of you.

2. Will there be any impact of marriage on your credit score?

Here also, the answer remains the same 'NO'. The credit score and credit history don't get merged with your partner in the case of a married couple, so you don't need to worry about the credit score being affected if your spouse has a low score, then you or vice versa.

Check out the below article for more information:

A Step-By-Step Guide To Building A Strong Credit Score 

3. Should you open a joint account?

Before you open a joint account, it is better to keep a check of few things in your mind; otherwise, you may end up with some unknown bad surprises:

  • The joint account can be operated by both the partners, you and your spouse.
  • The loans or credit cards taken from this account will be shown in the credit history of both partners, and thus, if timely payments aren't made, then both will need to face a fall in their credit score.
  • If the debt is incurred through this joint account, both the partners are liable to pay it back irrespective of who has taken it and for what purpose it was taken.

Thus, it is better to keep the finances clear and have a perfect roadmap before you combine your finances to make it easy to file combined taxes and transparently manage finances.

Check out the below articles for more information:

1) What Are The Legal Implications Of Buying A Property Jointly?

2) Tax Implications on jointly owned property 

4. Is it best for married couples to become authorized users on all accounts?

The answer to this question mainly depends on your partner's credit score and ability to manage finances.

If your partner has a good credit history, there is nothing bad about becoming an authorized user on all the accounts. But, if it is the other way around, like your partner has some dark spots in the credit history and is currently struggling with them, you should give a second thought to becoming an authorized user on all the accounts.

The primary reason for this in the case of authorized users, you won't be liable to pay the dues or credit card bills for the same account. But suppose there are any payment delays or in the worst situation. In that case, if your partner misses paying a few EMIs, it will negatively impact your credit score as all these payments will be reflected in your credit history.

5. How does co-signing affect married couples?

Co-signing can affect married couples to a vast extent because if you co-sign a loan for buying a new house or car or anything else, it will directly be reflected in your credit history.

In addition to that, if your partner dies or he/she isn't able to pay the dues and EMIs for this loan, banks and creditors will run behind you and force you to clear all the dues.

Thus the significant difference between co-signing and authorized user is that:

  • In co-signing, you will be liable to pay all the dues, EMIs or loans you might have taken with your partner, and they will also be reflected in your credit history. They can negatively affect your credit score if payments are delayed.
  • While as an authorized user, you aren't liable to pay the dues or loans your partner has taken, but they will still be reflected in your credit history and affect your credit score if payments are delayed.

Thus, it is advisable to take an individual loan rather than co-signing for the loan. Because it will give you the advantage to get a loan at much lower rates, let's see how?

If any of the partner's credit score is high should apply for the loan. As banks or creditors check for credit score and credit history, they will offer loans at cheaper rates than if you had applied with co-signing in which the credit score of both the partners is checked, and at that place, you might get a loan with somewhat higher interest rates.

Check out the below article for more information:

Getting A Home Loan? Know These Home Loan Charges Before You Apply

6. What if there are joint accounts & we separate or divorce?

No one wants the worst to happen to them, but many times that unfortunate event can happen and thus, you should be prepared to face it. 

Getting a divorce or separation is an unfortunate event for the married couple. Still, to ensure that you both don't face any difficulties in the future due to finances and money matters, you should follow the points listed below:

  • It would be best to make sure that all the finances are made clear, or at least plans and commitments are made to pay the pending loans or credit card bills; otherwise, you and your spouse's credit history and credit score will be badly impacted.
  • It is rare for the courts to allow a split of loans, so you need to be prepared for that by either foreclosing all the pending loans. You can also opt for selling the asset for which the loan was taken to clear the loan dues.
  • You also need to make sure that all the joint accounts are closed and no pending dues are left for the same so that you don't face any consequences in the future.

Thus, having your individual account at this point in time is very useful, so from day one, you can ensure that you have at least one personal account that can be used in the circumstances like this.

Summary

  • Your credit score won't be affected just because you are married, nor will your accounts get merged with your partner's account.
  • You can open a joint account, but you need to ensure that all the credit card bills and payments are made on time; otherwise, it will directly impact your credit score.
  • Co-signing will indeed affect your credit history and credit score if payments aren't paid up on time, and along with that, you will also be legally liable for paying the loans, EMIs, etc.