Husbands and wives typically apply for financing together. But if one party, such as the wife, has a bad credit history, getting the credit a couple needs can prove challenging. Everyone has their own credit score and history. But oftentimes, the credit habits of one spouse can affect the other.
Its common for two married people to have individual or separate credit accounts. They may have acquired these accounts before marrying, and continue to manage these accounts on their own. If a particular account only has the personal information of a wife, this account will not appear on the husband's credit report. The wife could miss payments or stop paying the account altogether, and the creditor will not seek payment from the husband or report the delinquency on the husband's credit report. This does not apply if you live in a community property state where all property, assets and debts accumulated during the marriage become the responsibility of both spouses.
The problem arises when couples share credit accounts. For example, the husband or wife may have a credit card or loan and then decide to add the spouse's name to the account. The account switches from an individual account to a joint account. Instead of the account affecting only one party, both husband and wife are responsible for the account; and missing or skipping payments can affect both credit histories and scores.
Getting Future Financing
Applying for a mortgage loan or auto loan with a spouse is an effective way to increase approval odds and increase purchasing power because lenders take the combined income of both spouses when considering the application. But if the husband has good credit and the wife has poor credit or vice versa, this can affect whether the couple gets approved for financing. Bad credit applicants are risky to lenders, and while some lenders will approve the application as long as one borrower has a good credit reputation, the lender can charge a higher interest rate on the loan or approve the borrowers for less money.
Several methods can help couples get around credit issues when one party, such as the wife, has bad credit. Until the wife improves her credit score by paying bills on time and paying down debt, the couple could refrain from acquiring joint accounts together. And if the husband is an authorised user on the wife's credit card, removing his name from the account alleviates the credit card company coming after him for payment. Depending on the husband's income, he can apply for mortgage loans and auto loans without his wife to avoid a possible rejection and higher interest rate.