When a couple decides to marry, usually there’s an understanding they’ll be sharing things moving forward. This is true for couples in Canada and all over the world. Many newlyweds will share a last name, a primary address, several monthly expenses, and finances.
While these are all important elements in a marriage, finances can be very complicated. Sharing finances should lead to conversations about income, assets, debts, bank accounts, and credit histories, among others. Here’s what engaged and seriously dating couples should know about credit.
What Is Credit?
Generally, the term “credit” refers to a person’s creditworthiness or history as a borrower. This record is often expressed as a number or code, typically called a credit score. This score is based on your debt history and provides insight to lenders on the likelihood of you repaying debt on time. Credit scores not only impact your ability to secure loans or credit cards, but they can also affect employment opportunities sometimes.
What Does a Score Say?
In Canada, an individual’s credit rating is alphanumeric. A number ranging from 1 to 9 indicates your payment track record. A “1” means the person always pays their bills within 30 days of the due date. A “9” means the person never pays their bills. A “0” means the person has no credit history. Letters indicate the type of debt a borrower has:
- I – This is an installment loan where the borrower makes fixed payments on a regular schedule until an established date. Think of a mortgage or a loan for college.
- O – This is an open credit account where a balance must be repaid in full after a certain period. Certain charge cards (as opposed to credit cards) work this way.
- R – This refers to revolving credit, such as credit cards, where the balance and repayment vary.
The type of debt you incur also matters to anyone reviewing your history as a borrower.
Do Married Couples Share Scores?
When two become one in marriage, their histories (and scores) do not merge. Your history is your own, and the same is true for your partner. Should you choose to open an account together or secure a loan together, lenders will review both histories. That shared account will also show up on both of your records. It’s important to discuss current debt and attitudes toward borrowing in advance.
Does Bad Credit Impact My Partner?
The good news is that having a spouse with bad credit doesn’t lower yours by marriage or association. Getting married doesn’t do anything for or against your rating. Joint debt will show up on both reports. Potential lenders will review both your and your partner’s histories if you’re applying for a loan together. If you add your partner as an authorized user to one or more accounts (or vice versa), those accounts will be a part of both histories.
Do Name Changes Impact My Score?
Taking on your spouse’s last name, hyphenating names, or choosing a new name doesn’t impact your score. It doesn’t reset your borrower history. You can initiate a name change with credit reporting bureaus by formally contacting them. Your reports may also update as you register a name change with existing accounts.
What About Disputes?
If a report shows inaccurate information, you can formally dispute it with credit reporting bureaus. This is true for individual debt and shared debt. Because your and your partner’s credit records are separate, clearing up a dispute on shared debt does not automatically clear it for both you and your partner.
Finances are a complex subject for dating, engaged, and married couples. It’s important to be up on all the facts before you and your significant other decide to make joint purchases and take on debt. Your individual credit histories can’t automatically impact your shared financial future, but they may provide critical insights sooner than later.
