By Lew Sichelman
RISMEDIA, Oct. 2, 2007-(MarketWatch)-Question: I was wondering what will happen to my credit score after my boyfriend and I get married. We both have bad credit and we have been working on repairing mine first because it isn’t as bad and will repair sooner. We would love to buy our first home, but I am curious: If we get married, does “his” score become “our” score and all the repair to mine won’t matter much? When we do buy a home, will his credit need to be considered as well as mine because we are married or can I apply for the loan separately? Tracey (and Ben)
Answer: The short answer is no, your credit scores remain separate once you are married.
That’s the good news.
The troubling news, at least in your case, arises when you choose to mingle accounts and apply for joint credit and loans. In these cases, says Eric Lindeen of Zoot Enterprises, a Bozeman, Mont., firm which provides financial-services companies with instant credit “decisioning” and loan origination systems, both credit scores are taken into consideration.
Consequently, you need to weigh the pros and cons of a joint application. In some cases, you may end up paying a higher interest rate or receive less money than you would had you applied for a mortgage on your own, depending upon the severity of damage contained in both credit reports.
If you choose to apply for the home loan separately, Lindeen says, your husband’s credit history legally cannot be taken into account unless you are relying on his income to assist with getting the loan and paying the bills.
But if you live in a community property state — including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington — information regarding your spouse may be requested. Your spouse also may be required to sign a waiver in these states.
Lindeen also advises that in all cases, it is important to check the type of loan that you are applying for to see if the bank will take your spouse’s credit history into account when making the decision.
“In general, if you apply for a loan separately, your credit is the one that will be considered when assessing the risk,” he says. “Although applying jointly can help repair your spouse’s credit by providing positive payment information, you will be assuming full responsibility for those debts. Bankruptcy is much more difficult today, and certain loan types, such as student loans, are not dismissed in a bankruptcy.”
It is important to note that when repairing damage to your credit, focus on reputable methods versus a quick fix that may not serve you well. The first step to repairing credit is to stop accumulating debt. Reputable means of repairing your credit also include paying off your debt, making sure delinquent accounts are brought current, checking your credit report for errors, not applying for more credit and decreasing your “open to buy” credit limits.
Be cautious of companies that promise to fix your credit fast by cleaning up your credit report and claim they can convince creditors that you don’t owe the debt, Lindeen warns.
“Lenders look for indications of unscrupulous repairs and will adjust your score appropriately. If it sounds too good to be true, it probably is. There isn’t a quick solution to repairing credit.”
More than a few readers have said the advice offered in my response about the impact on your credit score by paying off old debt was incorrect. Actually, it was the advice of Ron Litt, president of Market Kinetix in Houston, but others have told me the same thing. And now, it seems, we’re all wrong.
“Paying any amount on an old past due account does not reset the seven-year reporting clock,” commented Michael Bovee of the Consumer Recovery Network. “It is unfortunate that there are so many misconceptions on this issue. Consumers need the facts so that they can map and plan for their future.”
Bovee says the only way an account can be “re-aged” is by the original credit grantor and even then only if the account has been “brought current.” “If a furnisher of information to the credit-reporting agencies were to do as your quote suggests, it would be a violation of the Fair Credit Reporting Act. Admittedly this happens far too often. Exposing the practice is what needs to be addressed, not legitimizing it.”
According to reader Nancy Nihart, the purge date and seven-year rule draw from the original delinquency date that lead up to the collection or charge off. “Paying the debit does not change the original delinquency date, only the last activity date,” Nihart reports. Moreover, she assures that if a debit is sold to a collection agency or other company, the original delinquency date cannot be changed to keep it on your credit report longer.
Nationally syndicated columnist Lew Sichelman has been covering the housing market for 35 years. Because of the volume of mail he receives, he cannot answer individual questions, nor can all questions be answered in this space.