Three Common Credit Myths on Joint Accounts
When couples get engaged, they make the decision to spend the rest of their lives together. They immediately face a number of decisions. Where will we live? When will we get married? Should we merge our finances?
One of the most common questions that couples face is whether to open a joint credit card account. The answer depends on each couple’s individual situation. You need to take a hard and honest look at each other and your spending habits, and make the decision that is right for the two of you.
But there are a number of misunderstandings that couples have regarding credit. Let’s make sure we clear up some of those common myths:
Your spouse’s credit can’t hurt you. Not true. If you have excellent credit and your spouse has less than perfect credit, your joint application for a top-of-the-line credit card could actually be declined. Both of your credit scores will be taken into consideration when you jointly apply for a credit card. If you want your joint credit application to be approved, it’s a good idea to order your credit score before you visit the bank in order to get a clear picture of your current financial situation as a couple.
Your can’t help your spouse rebuild credit. This is a credit myth. If you add your spouse as a secondary cardholder, the payment history only affects your credit score. However, if you apply for a joint credit card, the payment history will be reported on both of your individual credit reports and will affect each of your personal credit scores. If your spouse has a low credit score, then opening a joint credit card account and making the monthly payments on time will help rebuild your spouse’s credit. If you spouse is a spender, it may be a good idea to apply for a joint credit card with a low limit to ensure your spouse doesn’t overspend, make late payments and harm your credit score.
Joint credit means you split the debt. Once again, this is a common misunderstanding. Having a joint credit card does not mean you both owe half the debt. It actually means you can each be solely liable and 100% responsible for the entire amount of the outstanding debt. If being liable for someone else’s debt makes you nervous, then it may be wise to keep separate credit card accounts. It is fairly common for couples to have separate credit cards. It doesn’t mean you don’t love or trust your spouse; it means you want to be responsible for your own financial well-being.