Does a Non-Working Spouse's Credit Affect a Home Loan?

Your spouse's credit score can affect a joint mortgage application.

Your spouse's credit score can affect a joint mortgage application.

Mortgage lenders rely heavily on the three-digit credit scores when determining whether to accept or deny borrowers who apply for mortgage loans. The higher your credit score, the better your chances of qualifying for a loan and earning a lower interest rate. Because of this, many married couples leave one spouse -- the one with the lower credit score -- off the loan application, especially when that spouse with poor credit does not work and, therefore, can't contribute an income stream to the loan application.

The Power of Credit Scores

Your three-digit credit score tells lenders how well you've managed your credit in the past. If you have a history of paying your bills late, your credit score is probably low. Running up large amounts of credit-card debt will also lower your score. And if you recently declared bankruptcy or suffered a foreclosure, your credit score will plummet. In general, lenders reserve their lowest interest rates for those borrowers whose credit scores are 740 or higher on the FICO credit-scoring scale. If your score is less than 640, you might struggle to qualify for a conventional mortgage loan.

Why Spouses Apply Together

Married couples often apply for a mortgage loan jointly if they both work. That way, lenders can use both incomes when determining debt-to-income ratios. This is important; lenders want your total monthly debts, including your estimated new mortgage payment, to equal no more than 36 percent of your gross monthly income. It's easier to achieve this debt-to-income ratio when spouses can present two incomes to lenders. However, a spouse who isn't working and isn't bringing in income can't help with the debt-to-income ratio. Such spouses can prove a hindrance if their credit scores are low.

The Negative Impact of Spousal Credit

If your spouse has an excellent credit score -- one that is equal to or higher than yours -- it will do no harm to apply jointly with him or her, even if that spouse does not bring any income. But if your spouse's credit score is lower than yours, it could jeopardize your chances to qualify for a loan. Lenders only consider the lowest credit score on a joint application when determining who qualifies for a loan and at what interest rate. Even if you have a stellar credit score, your lender could deny your loan request if your non-working spouse's credit score is terrible.

Interest Rates

A non-working spouse with a low credit score might also force you to pay more in mortgage interest each month even if lenders do approve your loan application. Lenders pass out higher rates to borrowers with low credit scores. It's a way for lenders to protect themselves financially, because borrowers with low credit scores are more likely to miss payments and eventually default on their loans. Your lender will only consider the lowest credit score for couples applying jointly for a mortgage loan. Because of this, you might get saddled with a high interest rate even if your credit is excellent. If your spouse is not working, can't contribute to your debt-to-income ratio and has bad credit, it doesn't make sense to include him or her on the mortgage loan application.


About the Author

Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.

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