Credit, When You Are Married
Managing your credit can be tricky, even when you’re the only person involved in your financial decisions. Add a new spouse to the mix, and you have to be extra careful to ensure your credit remains in good standing.
For many engaged couples, talking about finances takes a back seat to the excitement of wedding planning. But, before saying “I do,” you need to be aware of the credit issues that could arise with a new marriage.
First of all, both you and your spouse should put all your financial records – savings, salaries, investments, real estate, and especially credit – on the table. If one of you has a less-than-glowing credit history, it will affect the other as soon as you start applying for credit together and opening joint accounts. In addition, your new joint accounts will appear on both spouses’ credit reports in the future, so be sure to pay careful attention to your bills and pay them on time.
Once you’ve aired your credit laundry, you’ll need to decide whether or not to merge all of your financial accounts. Many couples do this because consolidated accounts often make for easier record keeping. Just remember, both of you are responsible for all debt incurred in any joint credit accounts. So, regardless of who’s incurring debt, a missed payment on a joint account will negatively affect both of your records. The same is true in community property states, where virtually any debt entered into during marriage is automatically considered joint. Consider also if you miss a payment on an individual account, that payment may very well impact your ability to open joint accounts because both credit histories will be considered.
The best way to keep your record clean starts with a solid understanding of the terms of your joint accounts. That means paying attention to interest rates, credit limits, annual or late payment fees, and cash advance limits. If you decide to consolidate your accounts, you might want to keep at least one credit account in your own name as a safeguard in the event of an emergency. Keeping an individual account can also be a good thing in the event of divorce to reestablish an individual credit history.
Women, who take their husband’s surname after getting married, need to notify the Social Security Administration and their current creditors of this change. You do not need to notify the credit reporting agencies of a name change. They will automatically update the name on a credit report when creditors report it.
Divorce
With divorce and separation come new experiences and responsibilities. Suddenly words like “child support payments” and “100 percent liable for bills” enter the picture. If you ignore your increased financial obligations or fail to separate your accounts, it may be hard to open new accounts and obtain new loans in your name. But there are many moves you can make to protect and restore the good credit that took years to build.
Protect your good credit:
Your divorce decree does not relieve you from joint debts you incurred while married. You are responsible for joint accounts, from credit cards and car loans to home mortgages. Even when a divorce judge orders your ex-spouse to pay a certain bill, you’re still legally responsible for making sure it is paid because you promised – both as a couple and as individuals – to do so.
Federal law can trump state or civil law in certain situations, particularly when there is a conflict between the two. However, your example touches on contract law and the obligations arising from agreements with third parties, like lenders, rather than a direct conflict between federal and state law.
If a civil divorce court judge orders your ex-husband to take over car payments as part of a divorce settlement, that does not alter your legal obligations to the lender if your name is still on the loan. The lender is not bound by the divorce decree because they were not a party to the divorce proceedings. Therefore, unless the loan is refinanced in your ex-husband’s name alone, you remain legally responsible for the loan payments.
This is why it’s important in divorce settlements to ensure that assets and debts are appropriately reassigned, and necessary steps like refinancing are completed to remove one party’s legal responsibility. If the ex-spouse fails to make the payments, the lender can still hold you responsible, and your credit could be negatively impacted.
Death of a Spouse
If you’ve lost a spouse, you’re already going through one of the most emotionally draining experiences possible. When a loved one dies, there are also numerous financial matters to deal with, including credit and debt issues. There are, however, some simple steps you can take now to help down the road.
Stabilizing your credit in the event of a death can be difficult, especially if your spouse held all of the credit in his or her name. Keep in mind that in community property states, credit accounts opened during marriage are automatically joint. That means you are still responsible for any debt that your deceased spouse incurred.
By law, a creditor cannot automatically close a joint account or change the terms because of the death of one spouse. Generally, the creditor will ask the survivor to file a new credit application in his or her own name. After reviewing the new information, the creditor will then decide to continue to extend credit or alter the credit limit. You might want to open a new credit account in your name. In doing so, keep in mind that you must use your name only when applying. Including your deceased spouse’s name will result in a joint account. Experian automatically updates its records with periodic reports from the Social Security Administration. When the update is made, your spouse’s credit history will be flagged to show that he or she has passed away and their name will be removed from any pre-approved credit offer mailing lists
