Home > Mortgages > Can Your Spouse’s Credit Score Kill Your Mortgage?

Comments 0 Comments

Save for maybe the diehard financial romantics, it’s a rare wedding where “credit scores” share billing with sickness and health. But it might be time to update those well-worn marriage vows.

From that moment forward, your spouse’s credit profile will play a big role in your collective financial future. That’s especially true when the time comes to purchase a home.

Your spouse’s credit can make or break your mortgage. A score imbalance – hers is high and his is low – can mean getting saddled with a higher interest rate, or not qualifying at all. There are even cases where leaving a spouse off the loan application can’t overcome bad credit.

Let’s take a closer look.

Scores & Qualifying

Married couples still have individual credit scores. You don’t trade yours in for a joint FICO score upon tying the knot. But your credit histories definitely become knotted together.

Mortgage lenders look for stable, reliable income that’s likely to continue. In order to count your joint income toward qualifying, each spouse will need to be legally and financially obliged on the loan. Lenders will look at both of your credit scores and histories.

The first hurdle is clearing the lender’s credit score requirement. Those will vary by lender and loan type, but it’s typically anywhere from a 580 for FHA financing to a 720 or higher for conventional.

If you want to count your spouse’s income, you’ll each need to meet the credit score benchmark. Even if you’re sitting on an 800 FICO score, you can’t somehow compensate for your spouse’s 550.

Couples whose scores qualify can still run into issues. Higher credit scores often lead to better interest rates. But if one spouse has great credit and the other’s barely qualifies, your joint application isn’t going to garner great rates.

There are also credit-related issues beyond scores that can affect your home loan chances.

Bankruptcy & Foreclosure

Unfortunately, simply clearing a lender’s credit score requirement doesn’t mean you’re, well, in the clear.

Lenders and loan programs will often have “seasoning periods” following negative financial events like a bankruptcy, a foreclosure or a short sale. This is basically a set number of months or years a consumer needs to wait before being eligible to obtain a home loan. The specifics will vary based on a host of factors.

VA loans tend to be the most lenient. For example, a veteran can be eligible for a VA loan just two years removed from a foreclosure or a bankruptcy, and some lenders have no seasoning period following a short sale. But other types of loans can require significantly longer waits, up to seven years in some cases.

A spouse with a bankruptcy or foreclosure in their past could impact your chances of qualifying. They’ll typically need to be beyond any seasoning period in order to move forward with the loan.

Community Property States

Prospective buyers who can qualify based on their income alone can opt to leave their credit-challenged spouse off the loan application. But even then you might not be out of the woods.

If you’re purchasing in one of the country’s nine community property states, lenders can consider your spouse’s credit profile and debts even if they’re not on the loan. Those states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Not all lenders will worry about the non-purchasing spouse’s actual credit score, but those bigger events like foreclosure and bankruptcy can absolutely lead to a denial, even when the spouse isn’t on the loan.

There are exceptions and differing policies depending on the lender, the type of loan and other factors. You may not find the answer you’re hoping to hear, but it’s definitely worth shopping around if you’re facing a tough situation.

If you’re thinking of buying a house anytime in the foreseeable future, but haven’t yet checked your credit, now is a great time to start. You can pull your credit reports for free through AnnualCreditReport.com to check for errors in need of correction, or other issues that you can get to work on (like paying down your credit card debt) that can help build your credit. You can also see your credit scores for free on Credit.com, updated monthly, along with a breakdown of what factors are affecting your scores. From there, you can take some time to build credit and have a stronger credit standing by the time you apply for a mortgage.

More on Mortgages and Homebuying:

Image: Luka8au

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team