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Will My Spouse's Credit Score Change My Loan Options?

Sue Kerr-Cope,  Mortgage Advisor/Loan Manager

May 14, 2020 — 4 min read

There are far too many misconceptions circulating about what happens to credit* after people get married. Some of them are more like urban-legends, including plummeting credit scores if your spouse has a heavy load of debt such as student loans. Nothing could be further from the truth. Despite this type of over-the-top misinformation, there may be reasonable implications when it comes time to secure a home loan. Lenders generally take a long look at an applicant's credit when processing a mortgage application. These are ways that spousal credit scores and histories may impact getting a loan.

How Marriage Can Affect Credit

Although getting married does not automatically impact your credit score, there are things couples do that result in changes. For example, opening joint credit cards or loans generally results in the usage affecting both credit histories. Late payments, excessive use of credit, bank overdraft penalties, and other negatives may impact both spouses. On the other hand, adequately managed joint accounts could help raise scores. When partners work together in a fiscally responsible fashion, that teamwork could help the couple to secure a home loan. It's essential for married couples to keep in mind that commingling money and credit can positively or negatively affect your ability to get a loan. It's all about how you manage money as a couple.

Securing A Loan When One Spouse Has Poor Credit

It's important to keep in mind that credit scores are connected to only one person. Should you marry someone with a higher or lower score, yours does not necessarily change. That being said, both scores may affect the ability of a couple to secure a mortgage. Consider a scenario in which the lender requires the income of both parties to meet the home loan requirements for repayment. In this case, both credit histories would affect your loan approval and terms. If you apply jointly and meet the standards, the blemished credit history of one spouse could result in a higher interest rate. In these circumstances, one solution for couples has been to secure the mortgage entirely through the spouse with the best credit score. This may be the best way to proceed if there is sufficient income available from just the spouse with the higher credit score. The result may be a better rate. It's not uncommon for couples to later refinance once both scores are high enough.

Loan Options with Flexible Credit Requirements

The truth is this, you might have more loan options than you think. Each person's financial situation is different, so it's important to speak with a Mortgage Advisor about your specific needs. However, PacRes has multiple resources that can help get you started on your journey toward homeownership. Contact a Mortgage Advisor to learn more about your options.

Do Credit Pulls Lower Our Scores?

The three big credit bureaus (Experian, TransUnion, and Equifax) state it plainly: a borrower's score will not drop when a mortgage lender pulls their credit more than once in a two-week period. Not all credit checks are weighted equally. A credit card application carries more weight on credit than a mortgage loan. Credit card debts have a tendency to increase over time, make for larger risk which lowers credit. Mortgage debt, by contrast, eventually pays down to $0, so mortgage loan checks don't have as much weight on overall credit score.

Tips for Improving Your Score

If you're considering buying a home in the near future, but want to work on your credit first, we recommend: Monitoring Your Card Balances Weighing in at a hefty 30 percent, credit utilization falls closely behind payment history in importance to your overall score. Consumers with the highest credit scores keep their utilization in the 5 to 10 percent range. You should check your credit card statement regularly to find out what your credit limit is, as it can change without you being notified. Knowing What Accounts Are Active Your credit history or length of credit accounts makes up 15 percent of your credit score. The age of your oldest accounts is important, so you should be careful about closing accounts you don't use much since a longer credit history can count toward extra points on your score. Understanding What NOT to Do Should you co-sign for a relative or friends' loan? You should keep that in mind when you decide whether or not you want to put your credit reputation on the line.

Connect with a Mortgage Advisor today to learn more.

*Contact a credit counselor for more information.
**Some state and county maximum loan amount restrictions may apply.
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