Bankruptcy Facts, Repair Credit after Bankruptcy, Philip Tirone

In my last post, I talked about the second of four marriage and credit considerations. In summary, each spouse should build his or her own credit score.

In this post, we talk about the third consideration of marriage and credit.

Marriage and Credit Consideration #3: A Wise Approach to Mortgages

Though applying for joint credit cards can hurt a person’s credit card score, I often suggest applying for mortgages as a couple. In two-income households, this allows the couple to qualify for a much larger loan, so long as each spouse has a strong credit score. (See Marriage and Credit Consideration #2).

That said, keep in mind that this strategy can wreak havoc if you separate or divorce. To protect your credit score during divorce, you will need to refinance the home in just one person’s name

And if you can qualify individually, you might want to consider financing a home in one spouse’s name only, especially if either of these scenarios is true:

1)    You and your spouse own several investment properties or plan to own several investment properties in the future. If this is the case, having joint mortgages is not preferable. Most lenders only allow an individual to have four mortgages. If you and your spouse separated your mortgage loans, you could own a total of eight properties.

2)    Once spouse has bad credit. When qualifying for a home loan, both spouses’ credit scores will be evaluated, and the interest rate will likely be based on the lower of the two scores.

Applying individually comes with a certain amount of risk. Your spouse has no credit incentive to make the payment. If you are relying on your spouse to make half of the payment, and your spouse falls through on his or her obligation, your credit will be damaged, but your spouse’s credit will remain pristine.

In my next post, I will reveal the final of four marriage and credit considerations.