One thought that many people think about when getting married, is what their future spouse’s credit history is and their ability to obtain new debt. A correlating question is how will their future spouse’s credit history affect their own ability to obtain new debt. Why? Because they most likely, one day in the future, would like to know they have the option to purchase a new home, motor vehicle, or simply just obtain new debt. It can become much more concerning if your future spouse has filed bankruptcy within the last few years. How will their bankruptcy affect your ability to obtain new debt? Unfortunately, there are a lot of factors that can affect the answer to this question. So, regrettably, the answer is that it will depend.
Most importantly, it is crucial to make note that the fact alone that your future spouse filed bankruptcy, regardless of when, is absolutely immaterial to your individual credit report. Your credit report will not merge with your future spouse’s credit report simply because you got married. You both will maintain separate and apart credit reports. In other words, your individual credit report will remain the same as it was before getting married. However, by being married, your spouse may have to sign certain types of contracts.
The main way your future spouse’s bankruptcy will affect you is when you want to borrow money, but only because you can only borrow as much as your credit profile will allow. When you are married, your borrowing ability is equal to your combined credit limits. In other words, your individual borrowing power will remain the same, but your combined borrowing power may be lower because your spouse’s bankruptcy may have lowered his or her credit score. Luckily, this is not necessarily the bottom line as there are some ways to get around this. One such way is to use a co-signer if you need to obtain new debt right away. Some banks might even have a program that will allow you to obtain a mortgage with a co-signer and then to refinance it without the co-signer a year later as long as you have made all of your payments during the first year.
Regardless of when you are planning to obtain new debt, the most important way to handle your future spouse’s credit history is to begin working towards improving his or her credit score. You can begin with them obtaining a new credit card in their name alone, using it, and paying it off monthly. Look at it as being 18 years old again. How did you build your credit? You most likely got a credit card, used it, made your monthly payments on time and slowly were able to obtain additional credit cards or other loans, which you also paid on time. However, be sure to shop around for the best interest rates and for credit cards that do not have annual fees.
If you or your spouse are considering filing bankruptcy, it is always best to be prepared. By meeting with an experienced bankruptcy attorney, they can help you further understand the consequences a bankruptcy might have on your credit as well as your spouse’s credit. Contact the Law Office of David M. Goldman, PLLC today for a free initial consultation.