When Good Credit Marries Bad Credit

Each person has their own separate credit report, so you don't have to worry about your spouse' bad credit affecting your record the minute you get married. As long as you apply for a loan on your own, the lender can't check your spouse's credit report, too.

But the crux of the problem in today's financial environment is when purchasing a home. Most people are looking to purchase big homes where two incomes are needed to qualify for the mortgage. There isn't anymore creative financing terms like no-income verifications and sub-prime mortgages that allowed flexible credit terms. When purchasing a home today the borrower needs excellent credit so the spouse with bad credit will need some repair.

If you are able to purchase a home with one income listed then you should think about adding the second spouse name to the deed after the purchase. Title to the house will not be impacted by the mortgage.

However, most people are not aware that in certain states, any mortgage loan that is taken on within a marriage is considered a joint obligation. These nine community property states include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Community property states include any type of real estate, physical assets and all earnings generated by both spouses while married. Any type of asset that is acquired as a result of a gift or inheritance, or any asset that was owned prior to the marriage is not considered community property.

Cleaning up bad credit is not as difficult as you think; it can be time-consuming and definitely a challenge if you have many negatives on your report but it's possible to clean up your credit within a year or less.

The first misconception that everyone has is the less debt the better; it’s sort of a catch 22 when it comes to debt and credit. It seems the less debt that you are responsible for the lower your credit score will be. For example, if you have no credit cards, no car notes, no loans for years it can decrease your credit score. However, if you have one credit card and a car note that reports payments made on-time each month; this will increase your score to a favorable number.

It seems so ironic -- a person who has favorable savings and checking accounts with no negative credit trade lines but chooses not to have a credit card and multiple responsibilities that decrease their disposable income are frowned upon.

Another individual who has the car loan, two or three credit cards, a past judgment that is more than 5 years old but paid off and they still have a credit score of 700 with a modest savings account is well-regarded.

Are they more responsible because they handle more debt or is it more responsible to stay clear of debt and save more income?

Well, according to the credit bureau you need good debt to show you can balance responsibilities and companies will have more faith in lending you more money. Go figure that terminology?

No matter what your circumstances are, work together with your spouse to build a credit history that shows that you are responsible and creditworthy.