Although marriage unites you and your spouse, your credit scores remain separate. Filing a joint tax return can offer tax advantages, but it also makes the two of you equally liable for any debt. Under normal circumstances, filing taxes with your spouse won't affect your credit. However, if the joint tax return creates debt with the IRS, both scores are at risk. The most common way debt co-mingles is through shared accounts.
Separate Credit Scores
Your credit is joined when accounts are joined. As you begin purchasing assets together, credit starts to connect. If both your and your spouse's names are on credit cards or loans, the information will appear on both of your credit reports. Even if you are only listed as an authorized user or co-signer on your spouse's account, the credit bureaus will list his account activity on your report. If you and your spouse are applying for a mortgage together, the lender may use the services of a mortgage reporting company to obtain a joint credit report. Credit scores from the three major credit bureaus are listed for each of you in one report. Credit scores are based on the payment history of your accounts, number of inquiries for new credit, credit utilization ratio, age of credit and type of credit.
Joint Tax Debt
When you file a joint tax return, you are both liable for any federal income tax underpayment, regardless of who was responsible. When the debt is settled quickly using funds on hand, it won't impact your credit scores. If you choose to settle the debt by using a credit card or taking out a personal loan, then your score may suffer. Utilizing too much credit causes a credit score to drop. New credit lines also temporarily lower a credit score.
Federal Tax Liens
If you can't afford to pay off the debt in full, the IRS offers an installment plan option. Even with a payment agreement, the IRS can choose to place a federal tax lien on your property until the last payment is made. Tax liens can lower a credit score by 200 points or more. The lien can remain on your credit reports for seven years, even after the lien is satisfied.
If you live in a community property state, marital assets and liabilities are shared. You can be held accountable for your spouse's debt, even if your name doesn't appear on the account. For instance, if your husband accumulates credit card debt during your marriage, the creditor can attempt to collect the debt from you. If the debt remains unpaid, your credit scores may feel the impact.
- IRS: Three Ways to Pay Your Federal Income Tax
- PR Web: IRS “Fresh Start” Program Helps Certain Taxpayers Significantly Improve Credit Scores
- Springboard Non-Profit Consumer Credit Management: Couples, Marriages and Credit Reports: Busting the Myths
- Fox Business: Four Common Myths About Debt and Marriage
- Business Insider: 6 Myths About Couples With Joint Credit Accounts
- Nolo: Debt and Marriage - When Do I Owe My Spouse's Debts?