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Marrying Someone Who has a Lot of Debt or Bad Credit
Ideally Marriages are about taking each other for better or worse, for richer or poorer. However in real life the prospect of finding out that whatever you have worked so hard for all your life can be nullified by a partner in debt is far from appealing. So here are the facts about marrying someone with bad credit and what you can do about it.
First of all it is necessary to understand what a bad credit means. In simplest terms, a person with a bad credit has incurred debt way beyond their present capacity to repay. A credit rating determines a person’s credit worthiness. Also known as credit score, this is evaluated on the basis of an individual’s history of borrowing money and repaying debts. If he/she has defaulted on repayments, his/her credit rating goes down and the person is said to have “bad credit”.
But then why someone else’s bad credit should be a problem for you? The answer lies in the fact that once you get married to this person, knowingly or otherwise, you often end up having tied your fortunes to his/hers. Anyone who has a poor credit rating will find it extremely difficult to secure a loan from a financial institution. So if you have married a person with bad credit and then if you proceed to jointly seek a mortgage or a business loan, you may find your application being turned down. And even when your application is approved, the repayment terms may be far stricter and more expensive than it would have been had you jointly applied for the loan with a person with better credit rating.
An even greater danger in marrying someone with a bad credit is that you may stand to lose your own financial assets. Once you jointly incur debt with your partner or even keep a joint checking account, in case he/she is unable to repay his/her share of the debt, your creditors may be within their rights to realize the principal and interest on the debt from your individual assets. Apart from the financial loss this will mean to you, your own credit score will also suffer which in turn will negatively affect your ability to take loans and mortgages in future.
Apart from the actual monetary complications that a spouse with bad credit might bring into your own financial affairs, it can also pose dangers for comfortable married life. Remember this is a person who is already under substantial debt and therefore unlikely to be able to afford taking anymore financial responsibilities after marriage. Thus all major expenses would probably have to be borne by you – whether you want to go for a Mediterranean cruise or buy that 52-inch screen LCD TV, it is your paycheck that will be on the line. Finally if the person you're marrying doesn't believe in managing money wisely, it could lead to a lot of conflict. A carelessness about financial obligations may just as well signify a lack of sense of responsibility in other areas of life.
However this is not to mean that you should reject a person simply on the basis of a bad credit score. He/she may have been at the receiving end of some misfortune which compelled them to borrow more than what they can now comfortably repay. Or perhaps your partner just needs a little more time to establish his/her business or build a reputation in his/her field of work. In the United States, your credit history does not automatically become suspect if you marry someone with bad credit. Your credit rating will really depend upon your own record of incurring and repaying loans. If you continue to make regular debt repayments, there is no reason why your credit score should suffer. However the danger lies in entering into joint financial agreements with a partner who has a poor credit rating. For instance if you decide to take out a loan with your spouse, all payment history from then on will be recorded on both credit reports. When creditors generate reports, they are required by law to report information on a joint account in both of the account holders' names. So if your partner continues to be irresponsible towards debt repayment, you may find your own credit score going down because of the joint loan account and in extreme cases even your own assets on the line in case of heavy and continuous defaults. So if you don’t want your partner’s poor credit score to affect yours, the best thing to do is to maintain separate checking accounts and credit cards. This will not only ensure that you are saved from bearing your partner’s major expenses but also keep your assets safe in case he/she gets hauled by creditors for repeated default.
Apart from maintaining different accounts, it is also a good idea to keep your financial affairs separate from a spouse who has a lot of debt. So use caution before signing any joint agreements and if in doubt, always have a document checked by your own attorney or accountant. You can also consider restricting authorized users in case of debit cards or online financial accounts that you may have in your name.
However if you are not sure whether your partner’s bad credit is the result of a one-off misfortune or a symptom of careless living, one solution would be for you and your spouse to keep your accounts separate and apply for new credit separately, at least until your spouse’s credit history gets better. And finally remember one of the easiest ways to improve credit rating is to pay your bills on time. The larger the gaps in your joint bill payments, the greater the possibility of both your credit scores going bad.
Finally have a talk with your partner about your financial priorities. If you are not yet married, this is the perfect time to discuss what each of you wants from life, both as individuals and as a couple. And then decide how you both can go about realizing your dreams while keeping yourselves on steady financial ground. And even if you are already married, it is always better to clarify issues and doubts instead of giving in to uncertainty and financial disaster.