How to Protect Your Credit When You Marry Into Debt

how to protect your credit

How to Protect Your Credit

The days of marrying into a financially stable relationship have come and gone. Finding a man or woman with a high credit rating is like finding a tiger in your backyard – it could happen, but it’s very unlikely. For instance, 86% of newlyweds (and those planning to get married within the year) plan to discuss finances before saying “I do”.  How important is it to have the debt talk and to discuss how to protect your credit when considering tying the knot? Let’s review what happens when you marry someone who is drowning in it.

how to protect your credit

It seems everyone affected by the 2008 economic downturn included the the middle class. But this shouldn’t kill the idea of marriage. Just do what thousands of other married couples are doing for credit protection.

You’re Not Responsible for Past Debt

The good news includes the debt your spouse had before the two of you tied the knot isn’t your responsibility. This is true even if you decide to join bank accounts. Most of the time, your debt and credit rating are separate.

Of course, you need to check just to make sure. Word is that community property states may differ in their rules.

But it Could Become Your Responsibility

Before you jump up for joy, keep reading. There are mistakes you can make that could put you in the hot seat with creditors. For example, adding your name to your spouse’s credit cards.

The same goes if you choose to refinance a mortgage or car loan with both of your names. Debt consolidation is a great way to get out of debt. But if your name is on that consolidation loan with your spouse, then you’ve made yourself 50% responsible for it.

What About When You Divorce?

Financial troubles are one of the top reasons couples seek divorce. In fact, one survey shows that 39% of divorced participants labeled finances as the primary conflict in their marriage. That’s one more reason to discuss ways on how to protect your credit and take action with credit protection strategies before exchanging wedding bands.

In the event you do split, the debt your spouse had before the marriage goes with them. That goes for the debts that don’t have your name attached. The debts with your name on it and that took place during your marriage will be partly your responsibility.

how to protect your credit

Death can nullify a marriage, but it won’t do much for past debts. All that happens next is the debt is passed along to the next living relative. Whatever loans you co-signed for will be up to you to repay.

However, depending on the state you live in, community property law may not be practiced. This means you won’t be responsible for debts you didn’t benefit from. So that vacation or hobby your spouse borrowed money for wouldn’t count in this matter.

The arrangement of your divorce is also crucial. The two of you can agree to offset debt obligations by allowing the other to have a greater portion of the assets to pay for it down. Certain debts can also be assigned to each partner.

And Til Death Do Us Part?

Whatever your name isn’t on, your spouse’s estate will cover. But whatever is left over could be passed along to you. This scenario makes life insurance policies a must-have.

What You Can Do for Credit Protection

There isn’t a way out of marrying into debt. Not even marrying an older (supposedly more established) individual can safeguard you. Not with older folks carrying more credit card debt than younger generations.

Talk About Your Financial Past

In the event you end up marrying into debt, there are ways to protect your financial well-being. You’ve already done the first part – learn what debts you’ll be responsible for. Have the talk with your future spouse before marriage to know what you’re getting yourself into.

Wait a Little Longer

Next, you should consider playing the waiting game. If your mate’s debts are that bad, it may be wise to wait until the debts have been paid down a bit. If you can’t wait to be with your beau, then forego getting joint accounts.

Girl waiting by window with mobile phone

Plan Your Future Purchases

It’s important to know how you will handle making major buying decisions. Such as purchasing a home or vehicle, or taking out loans for education, debt consolidation, credit protection, and so on. There are several ways you can handle making these financial obligations.

Apply for Credit Separately

For starters, you can avoid applying for credit together. If you’re the one with great credit, and you feel you can handle the payments together, then put it in your name. You’ll have a higher chance of approval and a lower APR.

The risk with this option is if your spouse divorces you or passes away, that debt falls on your shoulders. Also, be careful about adding just your spouse’s name to the loan. This will give them property rights without the debt obligation.

So if they ride off with the car after the divorce, good luck getting it back! Meanwhile, you’re stuck making the payments for it or risk blemishing your great credit.

Co-Sign Your Spouses Loans

You want to be a great spouse, which may mean co-signing a loan to help them further their education. It’s common for one spouse to return to school later in life. While this is a great gesture, prepare for the possible fallout from a divorce or economic downturn.

Add Your Spouse as a Joint Account Holder

What’s clever about this, is that the joint holder’s responsible for the balance. Adding your spouse also won’t hurt your credit rating (unless they decide to use up your available credit). Thirty percent of your credit rating depends upon how much credit you’re using.

how to protect your credit

Another option on how to protect your credit is to add your spouse as an authorized account user. This won’t affect your credit report, but your spouse is not liable for their payments.

Learn More About Saving Your Credit

Empower yourself with the knowledge needed for credit protection and building. This is the goal of Credit Squared – to offer actionable tips for improving your financial situation. Now is always the best time to start and begin to learn how to protect your credit.

Your credit is your future – without it, becoming financially stable will be impossible. You can begin your credit building and improvement today. Visit Credit Squared to learn ways to enhance your purchasing power!

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10 Comments

  1. Hello, you are right that one’s happiness after deciding to marry can cover for awhile the negative thoughts about financial issues.

    I was surprised when you stated that good credit is not a common thing. My friend married a man who had bad credit, but she is now in control of the finances. I think that it was a one time mistake when he did not think about the consequences of his decisions.

    Overall, it is no fun to fight over finances. I would prefer to have separate accounts, checking and credit cards.

    A few decades ago, when the man was the bread winner, woman depended mostly on his income. Now it is different. We can live happily and be responsible for our own finances.

    However, you provide great advice regarding debt protection.

    Thanks for the informative read, all the best, be healthy and wealthy, Nemira.

    • Hi Nemira- Thanks for commenting. What you state is quite common with couples who decide to get married but haven’t considered the financial implications until after they have taken their vows.

      Bad finances can be relationship killers, so would be wise to have candid conversations about who will manage the money and how to live within the family budget before tying the knot.

      Sometimes it is a good idea to keep things separate, however quite often couples acquire things together like a mortgage note or lines of credit.

      Just know what you are getting into before getting married and realize that if you acquire credit together you will be 50% responsible for it.

      Patrick

      Credit Squared

  2. Who thought about such a problem. The advice you gave here is excellent. One thing for sure, you made me think twice before jumping in. Thank God I have no such problem, but my brother just divorced and is experiencing some of these issues. I’m mentioning your site to him, as I believe some of the information here will help him out.

    Thank you.

    • Manor – Thanks for commenting. I agree, who could conceive of these problems, especially when it comes to the person you love. But they do exist, so I thought I would address them with this post.

      I believe personal finances are one of the most important things you must discuss before you get married.

      So many problems arise during marriage and finances are one of primary reasons for divorce.

      So, before considering tying the knot understand and talk about how the bills are going to get paid.

      In addition, discuss how to stay on budget as a couple, how much credit you will use and make sure to monitor both of your credit scores.

      Patrick

      Credit Squared

  3. Hi Patrick
    It is possible to live your life, without using credit. But the people who do, are in the minority.
    Unfortunately the world now uses credit for expansion, whatever happened to buying a company with profits?
    I wish more people learnt to live within their means, and saved the difference.
    Maybe we could make a pact before we get married, you must be debt free!
    Cheers

    • Greg – It would be great to acquire such a pact before getting married. However, in real life it never works that way. Unless one is willing to head down the dreaded prenuptial agreement path.

      I most situations, especially with younger couples, neither has any assets. Primarily the reason why the discussion about finances should be top of mind before tying the knot.

      I agree with you about the growth of credit and that it seems to be a way of life today. Consumer credit has reached pre-2008 crash highs.

      I’ve never looked at credit as a way to carry debt, but rather a means towards an end. If married couples use credit wisely i.e. pay off the balances each month, then over time they can gain the power of leverage.

      That leverage can be a very effective tool in acquiring assets. Particularly when it comes to financing a new home or some other major life purchase.

      So my basic advice to people considering marriage, have a plan on how they intend to use credit after marriage. Save up for a good down payment on a home, manage your credit so that you establish a good credit score and it will all pay off in the long run.

      Thanks for commenting

      Patrick

      Credit Squared

  4. Patrick: Great stuff; did you ever think of possibly opening a business for marriage counseling as well? Just kidding but you have some great advice here.
    I had perfect credit until I married the wrong man who didn’t seem to care how far in debt we got and I trusted him because he was much older and made a whole lot more than I did. When we divorced though and there were children involved, I ended up having to sell the home to pay his tax debt. So the kids and I ended up with nothing except some child support. I think it is extremely important to have all credit issues handled and answered before tying the knot. Just my thoughts from experience.
    Times change though as I read in a previous comment. Women were the stay at home parent while dad worked sometimes, even two jobs to take care of the family finances. It seems like things were much easier then but I was also a child during those times too.
    Growing up? Something most kids want to do too fast so they can have their own credit card and their own car and most of them have no knowledge of what being responsible for credit debt is. You can really only know and understand what it is that you are taught. That is unless like myself, the child vows never to be like one or other of the parents.
    I think that this site is outstanding, has great advice for every age bracket too. You are so right when saying that you just never know what you are going to get into unless everything credit is discussed and settled beforehand.
    Thanks for sharing the pearls of your wisdom here and I do hope that this information goes viral. I was thinking about a site on how to have a great marriage; this site would be a wonderful link for it.
    Take care and thanks again.

    • Rene – Excellent idea on a website for a great marriage. People all over are searching for the perfect married life. I’m sure you could generate some interest.

      One of the biggest reasons for divorce is finances. I have several friends and relatives who have divorced over just that.

      That’s why everyone should have the discussion about credit before they tie the knot. It doesn’t guarantee that you will never end up in divorce, but if you go in with the mind set of protecting your credit, you have a better chance of making it work.

      Thanks for the compliments about the site and thanks for commenting on the post.

      Patrick

      Credit Squared

  5. Superb article on keeping your credit protected when you’re planning on getting married.

    I’m surprised the percentage rate of people getting divorced from financial problems was only 39%. I expected it to be way higher!

    These tips are going to help a huge amount of people plan out their finances with their spouses to be. Thanks for the article!

    • No problem.  I’m glad the article was helpful.  From my view the statistic is way too high.  If couples don’t understand that marriage is a partnership, then neglecting their credit and debt is not going to end well for the relationship.

      The article points out that 89% of newly weds plan on having the discussion about finances before tying the knot. If that’s true then a 39% divorce rate due to finances doesn’t translate well with the couples that potentially had the discussion.

      I think it’s a Mark Twain quote that kind of sums it all up “to get the full value of joy you must have someone to divide it with”.  Words all couples should consider when contemplating marriage.

      Thanks for commenting.

      Patrick

      Credit Squared

        

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