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You took vows: For better or for worse, in good times and in bad. Naturally, you’ll experience these ups and downs throughout the course of your marriage or partnership. For most couples, it’s their finances that cause significant tension and heartache.
When the time comes to buy a house or send your kids to college, your financial stability will surface and your credit score will bubble to the top. If you’re concerned that bad credit could become a serious deterrent, pool your resources in order to pull up that number.
With a little research and a lot of love and patience, you can help each other raise your credit scores and secure your financial future.
How does marriage affect your credit scores?
The short answer is: It doesn’t. Your credit score will remain an individualized score, regardless of your marital status. The three major credit bureaus keep a file based on the actions you take to manage your current debt.
That said, shared accounts do matter. If you and your significant other share a credit card, that line of credit will be factored into your credit score. Whose credit score it affects – yours or your spouse’s — sometimes depends on the designation of the account.
You could be designated as any one of the following:
The primary account holder — If you are the primary account holder, you are solely responsible for paying back the debt.
A joint account holder — You are equally responsible for the debt.
An authorized user — You may use the credit card, but ultimately, you are not responsible for any of the debt.
The VantageScore model does not take into account authorized users, which could be beneficial if the authorized user has good credit of their own.
However, the FICO scoring model considers all three designations as one in the same. With more than 90% of lenders using the FICO scoring method to determine your risk level, it’s almost a guarantee that any shared accounts will affect your personal credit score.
How can you raise your and your spouse’s credit scores?
Before you do anything, know what goes into your credit score.
FICO considers five main categories when calculating an individual’s credit score. According to myFICO.com, here are the five factors and the weight of each one on your total score:
- Payment history (35%)
- Amount of debt (30%)
- Length of credit history (15%)
- New credit (10%)
- Credit mix (10%)
As you can see, the majority of your score comes from making your credit card payments on time and the total amount of debt you have on those credit cards.
In order to raise your and your spouse’s credit scores, you’ll need to focus on improving these areas:
1. Review both of your credit scores together.
Sit down together to look at your credit reports. Identify the weak spots in each spouse’s score, so you know where to start making improvements.
Many credit cards offer a free FICO Score summary with a snapshot of the primary factors affecting your specific score. You’ll still have to get into the weeds a little bit, but this is a great starting point. Do this as a couple, so your spouse knows they have your full support and aren’t being judged by any “bad” behavior — and vice versa.
2. Add an authorized user to one of your accounts.
If your spouse’s credit score is lower than yours, help bring it up by adding them as an authorized user to one of your accounts that’s already in good standing. This will help boost their overall payment history, which largely impacts their total credit score.
This also enhances your spouse’s credit mix and increases their total credit limit. An increased credit limit may help lower their credit utilization ratio to a healthy 35% or less.
3. Let the underdog open any new accounts.
Ideally, you will cut total credit card spending. But if you just bought a new house that needs furnishing, let the spouse with the poorer payment history (or lower credit score) finance the bedroom suit.
While their total amount of debt will increase, this gives your spouse a chance to create a better payment history from the get-go — especially if they set up automatic bill pay.
4. Hold each other accountable.
Accountability helps people lose weight, eat healthier and train for their first 5K. There’s no reason it can’t work for your finances, as well. After all, your spouse is the best person to remind you of payment due dates and nudge you before buying those new shoes.
Offer the same accountability to them, and you’ll both help raise your credit scores — and keep them up.