The only time your spouse’s credit score impacts your loan eligibility is when you take a joint home loan.
Talking finance with your better half is not only tricky but also a sensitive matter. Your credit score is the snapshot of your financial life – a life which has taken years to build. And now you are wondering if your spouse’s score will impact your finances. In most cases, your spouse’s credit score will bear no impact on your finances.
Credit scores not merged after marriage
It is a myth that your credit score will be combined with your spouse’s score once you are married. There will be no change in your credit score or history after marriage. These scores are assigned based on individual credit histories and repayment patterns. In fact, credit bureaus never record your marital status while generating your credit report. So, if one of you have a score below average, it does not necessarily mean that the other will get bad deals on loans and credit cards.
One of the first things on the to-do list for most newlyweds is merging financial accounts. However, know that marriage does not mean your accounts will be merged automatically. You and your spouse will not automatically become joint users on each other’s accounts. You will have to submit applications for the same. Second, if you are merging savings accounts, they are not credit instruments, therefore, they will not have any impact on your score anyway.
Spouse’s credit score won’t impact loan application
There is no need to jointly apply for credit (be it a card or any loan) after marriage. If you are looking to apply for credit for yourself and apply individually, then there is no reason for the bank to check your spouse’s credit score. The loan application will be considered solely based on your credit merit.
Family insurance policies usually consider the income, employment, number of insured, and other parameters when deciding the premium. Credit score is not paramount while calculating premiums. Hence, neither you nor your spouse has to worry about credit scores affecting your insurance premiums.
Joint home loan applications
If you and your spouse plan to purchase a house, taking a joint home loan makes sense. You get to share the debt burden while paying EMIs, you get to avail independent tax benefits under Sections 80C and 24, and women borrowers/ co-borrowers get interest rate concessions.
But this also means that both your credit scores will be taken into consideration while determining your loan package. Your joint credit scores signify the level of risk you pose to the lender. So, even if one of you has a bad score, then you may forgo the concessional interest rates or not qualify for a high loan quantum.
The impact that your spouse’s credit score will have on your finances depends on individual circumstances. In the grand scheme of things, however, you and your spouse should maintain good credit scores so at no point are your finances impacted.
(The writer is CEO, BankBazaar.com)