When you marry, you generally expect to merge your whole life. From setting up house together, to sharing grocery expenses, it seems natural to do as much as you can to streamline your lives so that you are living as one, rather than trying to manage two different lives.
However, as romantic as this may seem, it’s important to understand that there are times when it’s not always best to share everything with your spouse — especially when it comes to finances. If you aren’t careful, your spouse can ruin your credit.
When are You Responsible for Your Spouse’s Poor Money Habits?
For the most part, you aren’t responsible for your spouse’s debts and poor habits unless you agree to take them on. In most cases, you each have your own credit report, and you each have your own credit score. That means that, except for in some cases, depending on state or provincial law, you are considered separate financial entities. And that’s the way it should be for the most part.
Things change, though, when you voluntarily take on some of your spouse’s debt or if you open credit accounts together. For example, my husband and I had a mortgage together for seven years before selling our home. We were both equally responsible for that mortgage. Additionally, I co-signed on my husband’s small private student loan, since he didn’t have the same income I had. Since we’re still married, and since we make sure the payment is made, it’s not an issue. But if something changed, and my husband decided not to make payments on that loan, I’d be responsible since I am the co-signer.
There are also still some credit cards that allow you to jointly apply for credit. So, you could get a credit card in both of your names, and you would both be responsible for paying any balance. If your spouse runs up the balance, and then doesn’t make payments, you will be reported as in debt and delinquent, along with your spouse. Anytime you agree to take on joint debt, you are just as responsible on paper. So, even if payments are your spouse’s responsibility, you need to be aware of what is happening so that you can step in before your credit is ruined if necessary.
How to Keep Your Spouse from Ruining Your Credit
The best way to keep your spouse from ruining your credit is to do what you can to avoid getting in a position where his or her poor habits can drag you down. It’s usually a good idea to each have your own credit card accounts. If your spouse decides to consolidate or refinance student debt, don’t agree to co-sign or turn it into joint debt.
If you are concerned about your spouse’s spending habits, it can make sense to keep other aspects of your finances separate as well. If your spouse doesn’t stick to a budget, it’s not a good idea to let him or her have access to an account that is used to pay bills, or that you use. If you don’t trust your spouse, you might need to keep your finances separate in all things to avoid having him or her drag down your credit.
Communication is another big key. Make sure that you talk about money, and how you are both spending it. If your spouse is responsible for making the rent payment while you buy groceries and pay utilities, you need to check in to make sure that the rent really is being paid. You don’t want to be unpleasantly surprised with eviction and an account going to collections — especially if your name is on the lease.
Have regular talks about money so that you can both see where you are, set financial goals together, and make adjustments to your plan. This can be a good way to keep you both accountable. This also gives you both a chance to mention problems so that they can be taken care of before they become catastrophes.
In most cases, unless you have a malicious spouse, a little communication and some planning and care when setting up your finances can go a long way toward ensuring that you both maintain your good financial reputations.
Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.