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Living with credit, Protecting yourself

Don’t let your credit take a backseat in your relationship

Kelly Dilworth

It can be tempting in a relationship to let your partner handle all your loans and bills,  but this could wind up costing you money in the long run. If you’re applying for a major loan, such as a mortgage, you might be turned down because you don’t have enough credit history of your own.

That’s what happened recently when my sister, Kim, and her husband, Nate, applied for a home loan in California. Their mortgage lender refused to put Kim’s name on the mortgage partially because she didn’t have a robust enough credit history to prove she was a worthy credit risk.

“You have really good credit,” the mortgage lender told her. “You just don’t have enough credit.”

My sister is in her early 30s and has been earning good money as a nurse for nearly a decade. But like a lot of millennials, she wasn’t interested in using credit to fund her purchases. For years, she would just use a debit card or cash.

She eventually obtained a joint credit card with Nate, but she didn’t apply for another card, one in her own name, until just before they decided to buy a new house. As a result, the total amount of credit available to her was relatively low.

Kim also avoided car loans in her 20s by saving enough money to buy her cars secondhand with cash. When she and her husband later bought a car they couldn’t afford to buy outright, they put the loan in Nate’s name.

Nate’s name is also on most of the bills they pay, making it harder for my sister to prove that she, too, can responsibly pay her bills. When a borrower doesn’t have a long credit history, a lender may be willing to look at alternative data points, such as utility bills or phone payments. But that only works if your name is on the bills.

Kim says it didn’t occur to her that she needed to do more to build her credit history. She and her husband have been together a long time and have mixed incomes and assets for more than 10 years. Having one partner handle some of their joint bills didn’t seem like a big deal.

But as my sister learned, when you let your partner take formal responsibility for a loan or bill, your credit doesn’t get a boost each time you jointly pay those bills. That could leave you in the lurch if you separate or your partner dies unexpectedly.

Without a solid credit history of your own, you could have a tough time proving you are a good credit risk. You also could wind up paying significantly higher rates on the loans you want to take out yourself, such as credit cards or personal loans.

Act now to make sure your name is on all your joint bills and also make sure you’re formally on the hook for family loans. Even if you stay together for years, you are both better off if each of you develops a strong credit score of your own.

My sister and her husband were eventually able to get a home loan approved under Nate’s name only, and they may eventually try to refinance it so that she can get her name on the loan, too. But until then, she’ll be jointly making mortgage payments, but she won’t get any credit for the on-time payments on her reports.

See related: 6 credit rules for newlyweds, Video: 5 credit tips before buying a house

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