Tying the Knot? How’s Their Credit?

Written by Posted On Monday, 07 June 2021 00:00

From a purely technical perspective, it’s good to know the credit profile of someone you’re soon to marry. Not the most romantic of notions but it’s still important. It can also get a little clumsy if you straight out ask your future forever partner, ‘Hey, btw, do you have good credit?’ That’s gonna be a turnoff, for sure. But you should get a general idea.

You’re probably very aware of where your own personal credit stands. The better your credit, the more credit offers you’re going to get in the mail. Creditors want your business because you’ve proven not only do you utilize various credit lines but are also responsible with them. Certainly making your monthly payments on time is the biggest factor but so is utilization. Creditors want you to charge things and then pay them off over time for the sole reason of collecting interest on the funds used. Credit utilization means not just using credit but also keeping an eye on outstanding balances along with available credit. Credit scores begin to climb when credit is used but also keeping a balance of approximately one-third of credit lines.

Yet when you get married, while each person keeps individual credit lines it will soon come a time to open a joint account. The new account might be for a new car or to open up a joint credit account and certainly to buy and finance a new home. If your soon to be betrothed also has excellent credit, both your scores will continue to rise. But there can be a hitch if one of the individuals has spotty credit. Here’s the deal- when two people apply for a loan together, each will have separate credit scores, one each from the three main credit repositories of TransUnion, Equifax and Experian. That then means there are six credit scores appearing on the newly acquired joint credit report. Which to use?

When applying for credit individually and the three scores are reported, lenders will use the middle score, not the highest or lowest. If someone sees three scores of 750, 781 and 755, the lender would then use 755 as the qualifying score. When a couple applies for new credit, lenders use the lowest of the two middle scores. If your qualifying scorer is 755 and the spouse’s scores report in at 620, 616 and 640, the individual’s qualifying score is 620. When combining both on the same mortgage application, the two middle scores are 755 and 620. Lenders would then use 620 as the qualifying score. This could mean a larger down payment or a slightly higher rate. That’s kinda getting in the weeds a bit but it’s how mortgage lenders use scores when qualifying those applying for a mortgage together. That’s why it’s important to get a handle on your future spouse’s credit profile.

No, I don’t think you need to blurt out something like, ‘Hey, how does your credit report look’ but even if you later find out your new spouse has damaged credit, it really doesn’t take all that long to get credit scores on the rebound. If you’ve got great credit and your newlywed not so much, working together you can get scores where they need to be.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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