Help! My Spouse Has No Credit History: The Secret to Improvement
If your spouse has no credit history, you might think you'll never be able to buy a house or get a car loan.
But there's good news.
It's easy to help a spouse build a credit history or even to improve bad credit. Here's how:
Understanding Credit
Understanding credit and its importance is the first step to building a solid credit history with your spouse. Whether your spouse has no credit history or bad credit, credit scores can change at least monthly, so no matter the situation, it's not permanent.
What Is Credit?
Your credit score is intended to reflect your creditworthiness, showing lenders how well you pay your bills and manage your existing credit lines. For example, you'll have good credit if you pay your bills on time and don't overextend your credit lines. On the other hand, having many late payments or using your credit too much could hurt your credit scores.
How Do You Build Credit?
To build credit, you have many options. First, it involves getting approved for loans or a credit card account. The key is to start small and work your way up.
Understanding Why Your Spouse Has No Credit History or Bad Credit
Before helping your spouse's credit, you must determine why your spouse has no credit history or bad credit in the first place. There are always reasons, and discussing them and ways to overcome them are the keys to moving forward.
Have a Credit Score Discussion
It might not feel pleasant, but you must have a credit score discussion. Ideally, you'll do this before you get married, but it's never too late to talk about credit. Don't be embarrassed to share if either spouse has bad credit; working together to fix it is critical and can make you feel like financial teammates.
Review Their Credit Report Together
Everyone gets free credit report access weekly, so before having the credit score discussion, both spouses should pull their credit from all three major credit bureaus — Equifax, Experian, and Transunion.
Communicate to Find and Repair the Problem
As you review the credit reports with your spouse, look for specific issues, such as:
Payments made over 30 days late
Credit lines with over 30% of the total outstanding
Too many revolving credit accounts, i.e. credit cards, especially if you aren’t managing them well
Not enough credit lines to create credit scores
Collections or other negative public records
Agree on a Plan of Action for Your Marriage and Credit Score
After determining why your spouse has no credit history, it's time to create a course of action. Together, you should create a plan that's feasible and comfortable for both parties.
Start by setting financial goals and milestones. Make your goals measurable, time-bound, and specific.
For example, don't say, 'we want to improve John's credit.' Instead, say, 'we want to improve John's credit by 40 points within six months,' or 'we want to build John’s credit file by opening at least 2 new accounts in the next six months.'
With detailed goals, you can create a plan that helps you achieve the goals. Also, with a specific timeline, you can measure your progress monthly to see if your efforts are enough or if you should change gears.
What to Do if Your Spouse Has No Credit History
If your spouse has no credit history, it can feel like you're starting from scratch. However, with your help, you can build your spouse's credit faster.
Build Credit Together
The nice thing about being married is you'll likely join your finances at least in some ways, and this makes it much easier to build credit faster. For example, if you have great credit, you can help your spouse build credit by co-signing accounts opened in your spouse's name.
Another way to build credit is to open joint accounts, such as joint credit cards or a loan. You may not qualify for something as large as a mortgage (in both your names) if you have a spouse with no credit, but smaller loans, such as personal or auto loans, may be possible.
Make Your Spouse an Authorized User on Your Credit Card
A great way to get your spouse's credit going is to make them an authorized user on your credit card. However, before doing this, ensure that your credit card company reports authorized users to the credit bureaus, as not all of them do.
Encourage Spouse to Open a Secured Credit Card
A secured credit card can be a good option if your spouse wants to open credit on their own. With a secured card, your security deposit is the collateral. The credit card company keeps the security deposit if you miss your payments, and your credit line equals your security deposit amount.
Co-Sign on a Small Loan With Your Spouse
Another way to help your spouse build credit is to co-sign on a small loan. Your spouse can be the primary account holder, but with your co-signing, you become legally liable for the debt. This may allow lenders to approve your spouse for the loan without any credit history because they know that you will be liable, too, and they see that you have good credit.
The Truth About Marriage and Credit Scores
Getting married may make it feel like everything in your life is suddenly intertwined, including your credit scores, but here's the truth:
Does getting married affect your credit score?
The answer is no. If you and your spouse keep your finances separate, including credit cards and loans, your spouse's credit would not affect yours. However, most spouses join finances at least partially, so helping your spouse build credit can be helpful to your spouse and also your family as a whole.
Getting a Mortgage With Bad or No Credit
One of the largest issues when your spouse doesn't have credit is getting a mortgage. Mortgage lenders look at both parties' credit scores, using the lower credit score to qualify for the loan. So if your spouse has bad or no credit, it can make qualifying for a mortgage difficult.
Here are some ways around it:
One Person's Name, One Person's Credit
If one spouse has better credit and enough income to qualify for the mortgage, you can apply in that person's name only. Your spouse can still be on the title but will not be on the loan, which would otherwise affect your chances of approval.
Improve and Then Buy
If you are comfortable where you live now, you can help your spouse improve their credit before buying a home. Unfortunately, there isn't any clear rule stating how long a person must have a good credit score to qualify for a mortgage.
Whose Credit Score Is Used on a Joint Mortgage?
Lenders pull all three credit scores for both applicants and use the lowest middle score between both parties. So, for example, if you had a 690, 695, and 700 score and your spouse had a 550, 555, and 560 credit score, lenders would use the 555 credit score to qualify for the loan.
Mortgage Options if One Spouse Has Bad or No Credit
If one spouse has bad or no credit, you should strongly consider leaving them off the loan. However, if you need your spouse's income to qualify for the loan, you may need an FHA or subprime loan, depending on your spouse's credit score and your particular situation.
Dangers Behind Marrying Someone With Bad Credit or No Credit
There are ways to protect yourself if you marry someone with bad or no credit, so understanding the dangers is important.
Dangers of Co-signing on a Loan
If your spouse has bad repayment habits and you co-sign on a loan, it could hurt your credit. For example, if your spouse doesn't make the payments and you don't realize it, the bad payment history can hurt your own credit scores, too. Worse yet, collection agencies can come after you for the funds if the account goes to collections.
Danger Behind Joint Assets
Joining assets doesn't affect your credit scores; however, there are dangers in combining assets if your spouse has bad financial habits that have led to bad credit. If those habits carry over into your assets, you could have more fees and interest, and therefore less money, than anticipated. There may also be implications if they file for bankruptcy at some point, with joint assets possibly being sought by creditors to repay one spouse’s debts.
Should You Combine Assets or Keep Them Separate?
There isn't a one-size-fits-all solution for combining assets. To determine what you should do, consider your spouse's financial habits, and determine if your assets would be at risk if combined. You may want to consult an attorney or financial advisor to understand your specific situation and options. If you trust your spouse, you may consider combining assets to make paying bills and reaching financial goals easier.
FAQs
Is Not Having Credit a Bad Thing?
You need credit to get loans and sometimes even utilities or cell phones. It can even affect your ability to rent an apartment! Due to this, not having credit could make things more difficult for you, especially if your spouse doesn't have a credit score either.
How Old Should You Be When You Start Building Credit?
You can start building credit as soon as you turn 18 years old. The sooner you start, the better.
Should My Spouse and I Seek Financial Counseling if One Has Bad Credit or No Credit at All?
If you or your spouse have credit issues, seeking financial counseling is a great way to get you both on the same page and to create a plan to improve or build credit.
What Does Someone Do if a Husband or Wife Has Good Credit but No Income?
It typically can't hurt to apply jointly for new loans with a spouse with good credit but no income. A higher credit score can help your chances of approval.
Does a Spouse's Debts Become Your Debts When Married?
Your spouse's debts (from before you were married) don't become yours unless your name is on those debts, too. Any debt your spouse brings to the marriage, therefore, will not automatically become yours.
Spouse Has No Credit History or Bad Credit - Key Takeaways
It can be frustrating when a spouse has no credit history, but with patience, there's a solution. The key is to work together to build good credit. If you can't find your way together, or if it’s taking too long, consider financial counseling to help both spouses get on the same page and learn how to build a solid credit history together.
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
