If you have just married or will be doing so in the near future, you have probably given some thought to how your union will affect your credit score in Canada. Does the credit rating of your spouse affect yours, and vice versa? Getting married means combining everything in your life, but does that extend to your credit?
For the majority of folks, exchanging vows will do nothing to affect your credit report. Both of you will continue to maintain a separate credit report, with each of your individual information not showing up on the other’s. What that means is that if your spouse brings a poor credit rating into the marriage, it will not show up on your credit report.
Just because a wife changes her last name and has the new one show up on her credit report does not mean that her previous history is magically erased. All of her credit information is tied to her social insurance number, which is the one thing that remains unchanged after marriage. There are situations where a credit bureau will mistakenly create a split file for the same person, but those incidences are few and far between. If you see that happen to you, simply contact the Canadian credit bureau and have them merge the split files.
The good news for you is that marrying someone with a bad credit score will leave your good rating unaffected. On the flip-side, a bad credit score will not improve when you marry someone with a good one. Both spouses will see their credit score calculated by their own individual actions.
Can Your Spouse’s Credit Affect Yours?
As a married couple, there is a pretty good chance that you will apply for a loan or credit card in both your names. When that happens, both credit scores are checked, with bad credit on a single applicant quite possibly resulting in the application being denied. Even if the credit card is approved, there is a possibility that a higher interest rate will be applied to the card. This can all be avoided by the spouse with the best credit rating applying separately.
With a joint account, or an account with an authorized user, the credit history of the account is reported on the credit reports of both people. That is the case even if only one spouse uses the account.
Both spouses are responsible for making sure that payments are made on loans and credit cards that are a joint account. If any of those accounts becomes delinquent, the creditor will come after both spouses in order to collect that amount owed. When an authorized user is added to an account, they are the only ones responsible for paying the debt. Obtain a free copy of your credit reports and you will notice that joint accounts show up on both you and your spouses report.
When One Spouse Has Bad Credit
If you and your spouse have credit scores that are far apart, decisions need to be made on how to handle credit applications. Should the spouse with the better credit score apply alone to ensure better interest rates? Would a joint application be better so that the spouse with the bad rating can see their score improve? You need to take a long hard look at your financial situation before making any decision.
In most cases, when applying for a joint loan such as a mortgage, the spouse with the better credit score should be the primary applicant; while the one with the worse credit should be secondary (if needed). With larger loans, it helps to have 2 applicants on the loan because it will increase your income level and what you can afford. The next time you apply for a loan, ask that your broker submits the application with the person with better credit first, the chances of getting approved are much greater!