November 4, 2007

Divorce Myths: Is my future spouse’s bad credit contagious?

Short answer: No, but you need to plan.

A common “divorce myth” we hear in our practice is a client’s concern that his or her spouse’s bad credit will affect their credit on marriage. The reality is that your credit remains separate, but you need to be careful if your spouse has bad credit and liability. Your credit file is not combined with your spouses by virtue of marriage and you have an absolute right to be considered for credit independently of your spouse and his or her credit issues. Your spouses’ low credit score will not affect your ability to independently obtain an auto loan or a mortgage, assuming you have the income to do so.

You do need to plan if your spouse has credit issues and liability. This is because while your credit files are not combined by virtue of marriage, a creditor of your spouses could go after an asset that is jointly titled. For example, assume Husband has $35,000 in child support arrears at the time of his marriage to Wife. Wife puts Husband on title to a house. Husband’s child support arrearage is now a lien on the house. If one spouse has substantial liability, plan for banking and owning property separately.