When you walk into a bank, bankers don’t like to rely on your smile or your personal recollections about how well you repay your debts. Instead, lenders look at your credit score to see how you’ve paid your debts in the past to determine how likely you are to default on a loan in the future.
Your credit score is one of the most important factors when it comes to applying for loans, including a mortgage to buy your home. When you’re married, your credit scores don’t get combined. However, your spouse’s credit management and credit report still affect you, especially when it comes to buying a home.
TL;DR (Too Long; Didn't Read)
Married couples' credit scores do not get combined when they apply for a mortgage.
Effects of Spouse’s Credit Usage
Your spouse’s credit usage can affect you in multiple ways. First, if you open any joint accounts, such as a joint credit card, the account will show up on both of your credit reports. If the bill gets paid on time each month, it helps you both. But, if you pay late, it shows up on both of your credit reports and dings both of your credit scores.
Second, when you go to apply for a joint loan, such as a mortgage, both of your credit scores will be considered. For example, you might have an 800-credit score, but if your spouse has a 600-credit score, it’s going to be much harder to get approved for a joint loan.
Applying for a Mortgage Together
When you apply for a mortgage with your spouse, banks look at both of your credit scores, and typically use the lowest credit when making decisions regarding your loan. If one spouse doesn’t have a good enough credit score, the banks might not be willing to make a joint loan at all. Even if you have a fantastic credit score, if your spouse’s is lower, your interest rate will usually be based on the lower score.
Apply for a Mortgage Without Your Spouse
One potential option if one spouse has a much lower credit score is for the spouse with the better credit score to apply for the mortgage alone. That way, only the credit score of the spouse with the better credit is considered by the lender.
The downside to this approach is that the lender will also only consider the income of the that spouse when determining if you have enough income to repay the loan. If the spouse with the higher credit score doesn’t have sufficient income, you will have to settle for a smaller mortgage.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."